servelec group plc annual report and accounts 2013 · servelec group plc annual report and accounts...

Servelec Group plcannual report and accounts 2013

Servelec Group plc annual report and accounts 2013

Servelec Group annual report and accounts 2013

WHO WE ARE

Servelec is a UK-based technology group, with significant intellectual property, providing software, hardware and services predominantly to the UK healthcare, oil & gas, nuclear, power, water, utilities and broadcast sectors.

The Group has two divisions; Servelec Healthcare and Servelec Automation

WE HAVE A STRONG TECHNOLOGY AND ENGINEERING HERITAGE AND LEADERSHIP POSITIONS IN OUR CHOSEN MARKETS

HealthcareSoftware

AutomationSystems

Servelec Group annual report and accounts 2013 1Strategic R

eportG

overnanceFinancial Statem

ents

11,277

11,165

12,929

10,852

10,837

9,552

32,601

31,874

23,190

9,064

8,392

5,039

2013

2012

2011

2013

2012

2011

2013

2012

2011

2013

2012

2011

2013

2012

2011

41,995

39,361

42,545

2013 HIGHLIGHTS2013 OPERATIONAL HIGHLIGHTS

• Servelec Group plc (formerly CSE-Global (UK)) Limited admitted to the London Stock Exchange on 2 December 2013.

• Strong cash generation facilitating a dividend of £6.5m to CSE Global Limited of Singapore, and listing on the London Stock Exchange with zero debt and circa £5m cash.

• Successful on-time delivery of a major software update of RiO within the National Programme for IT via BT and the start of its rollout of that to the Mental Health and Community Health Trusts in London and the South of England.

• Servelec Technologies launched 2 new RTUs in the year, the S2000micro for UK un-adopted sites and the LT2 with Tflo, a class 1 div 2 wellhead RTU with flow computer capabilities.

• Tynemarch acquisition in February 2013, a company which delivers true real-time business optimisation for our Automation division.

• Acquisition of Semaphore from CSE Global Limited in October 2013, which adds a worldwide distributor network for RTU sales.

• Disposal of our Slovakian company, CSE Controls s.r.o., in December 2013.

CONTENTS

Strategic Report 1 2013 highlights 2 At a glance 4 Our business model 5 Our key strengths 6 An insight into the Servelec Group 10 Chairman’s statement 12 Business review 16 Divisional reviews 26 Risk management 28 Corporate social responsibility

Governance 30 Board of Directors & Senior Management 32 Corporate governance report 34 Nomination Committee report 35 Audit Committee report 37 Remuneration report – Directors’ remuneration policy – Annual report on remuneration 48 Directors’ report 51 Statement of Directors’ responsibilities in

relation to the group financial statements

Financial Statements 52 Independent Auditor’s report 54 Consolidated income statement 54 Statement of comprehensive income 55 Statement of financial position 56 Statement of changes in equity 57 Statement of cash flows 58 Notes to the financial statements 85 Independent auditors’ report86 Company balance sheet 87 Company statement of total recognised

gains and losses 88 Notes to the financial statements 94 Corporate directory 95 Directors and advisers

FINANCIAL HIGHLIGHTS

Revenue (£’000s)

* Adjusted for share-based payment charges (note 24), intangibles amortisation (note 13) and royalty charges (FY12: £165,000 FY11: £3,225,000) levied by CSE Global Limited

£42.0m+6.7% (2012: £39.4m)

£11.3m+1.0% (2012: £11.2m)

£10.9m+0.1% (2012: £10.9m)

£32.6m+2.3% (2012: £31.9m)

£9.1m+8.0% (2012: £8.4m)

Underlying Operating Profit* (£’000s)

Operating Profit from Continuing Operations (£’000s)

Order Entry (£’000s)

Cash Flow from Operating Activities (£’000s)

Notes2013

£’0002012

£’000 2011

£’000

Operating Profit from Continuing Operations 10,852 10,837 9,552

Add Back:Royalty Charge 4 – 165 3,225Share Based Payments 24 41 – –Amortisation of Intangibles 13 384 163 152

Underlying Operating Profit from Continuing Operations 11,277 11,165 12,929

2 Servelec Group annual report and accounts 2013

AUTOMATION SYSTEM

S

SERVELEC GROUP

SERVELEC CON

TRO

LS

SERVELEC TECH

NO

LOG

IES

HE

ALT

HCA

RE SOFTWARE

AT A GLANCE

Servelec Group plc, formerly CSE-Global (UK) Limited, founded in 1977, has a strong technology and engineering heritage and today employs a highly skilled and knowledgeable workforce of over 450 full-time staff, operating predominantly from offices around the UK. The majority of the staff are based at the Group’s purpose built offices in Sheffield, one of which functions as the Group’s headquarters.

The origins of the Group’s business were in the design and manufacture of control systems for the Sheffield steel industry. Since that time, the Group has grown both organically and by acquisition and now operates two divisions: Servelec Healthcare and Servelec Automation.

Group StructureServelec Healthcare specialises in the design, development and implementation of Electronic Patient Record (EPR) software within secondary care settings and is a market leader in the Mental Health and Community Health sectors in England.

Servelec Automation provides complex, mission-critical control systems to large blue-chip companies mainly in the UK. Servelec Automation provides the whole lifecycle of services from consultancy, through to design, implementation, delivery, installation and on-going customer support and maintenance.

HealthcareSoftware

AutomationSystems

GROUPSTRUCTURE


eportG


ents

Revenue by division (split)

Adjusted gross pro�t by division (margin)

Adjusted EBITA by division (margin) Adjusted EBITA by division (margin)










Healthcare Automation

Servelec Healthcare specialises in the design, development and implementation of software within secondary care settings and is a market leader in both the Mental Health and Community Health sectors in England. Its software suite covers Electronic Patient Records, Patient Administration Systems, Clinical Information Systems, and e-prescribing systems.

Servelec Healthcare’s team of over 100 skilled software engineers, clinical specialists and service management professionals is focused on providing information solutions and services to the NHS and private healthcare organisations and the business has over 20 years’ experience in developing clinically-driven, enterprise-wide solutions for everyday use. Servelec Healthcare’s solutions are used by over 150,000 clinicians who support services available to approximately 25 per cent of England’s population across, in aggregate, 59 Mental Health Trusts and Community Health Providers.

Servelec Automation provides complex, mission-critical control systems to large, blue-chip companies mainly in the UK oil & gas, water, power, utilities and broadcast industries.

Servelec Automation is one of the UK’s largest independent suppliers of safety systems, protection systems and control systems to such industries. Servelec Automation provides whole lifecycle services from consultancy through to design, implementation, delivery, installation and on-going customer support and maintenance.

ControlsServelec Controls provides complex, mission-critical systems to many large blue-chip companies mainly in the Oil & Gas, Power and Nuclear industry sectors.

Key market sectors:

• OIL & GAS• NUCLEAR• POWER

TechnologiesServelec Technologies develops, manufactures and sells end-to-end telemetry monitoring, control systems and software to the Utilities (Water, Gas and Electricity), Broadcast and Transport markets.

Key market sectors:

• WATER • BROADCAST• UTILITIES

* Adjusted for the add back of Royalty Charges levied by CSE Global Limited (Note 4)

Adjusted EBITA by Division (margin)*

Order Entry

Adjusted Gross Profit by Division (margin)*

Revenue by Division (split)

£7.6m-13% (2012: £8.7m)

£5.9m+27% (2012: £4.7m)

£6.8m-15% (2012: £7.9m)

£25.8m+8% (2012: £23.9m)

£8.4m-11% (2012: £9.4m)

£10.0m+31% (2012: £7.7m)

£14.9m-11% (2012: £16.7m)

£27.1m+20% (2012: £22.6m)

Revenue

Key markets:

• MENTAL HEALTH• COMMUNITY• ACUTE

2013

2013

2013

2012

2012

2012

2012

2013

Healthcare 2013 Healthcare 2012

Automation 2013 Automation 2012


SERVELEC GROUP

FOCUS ON HEALTHCARE

AND AUTOMATION SECTORS

High levels of

intellectual propertyProv

en so

ftware and

engi

neer

in

g approach

managem

ent t

eam

Proven and exp

erie

nced

with its client base

Stro

ng, long-term relations

OUR BUSINESS MODEL

Servelec has a focus on profit growth, which we achieve by growing revenues only in areas where we can achieve strong, sustainable margins and cash generation. We work in particular market segments which are resilient to recession and have consistently maintained our gross margins and profitability. This approach has allowed Servelec to achieve a number one position in Water, Tier 2 Oil and Gas and Mental Health. Our model is to focus the business on maintaining these positions building strong client relationships in markets which have high barriers to entry. We utilise our core engineering skills, especially project management to expand into adjacent markets and pride ourselves on delivering systems on time and on budget.


eportG


ents

High level of intellectual property

Strong long–term relationships with its client base Proven engineering approach

Proven and experienced management team

OUR KEY STRENGTHS

Servelec has significant intellectual property which it will continue to enhance. Servelec Healthcare will continue to develop the RiO and Oceano products for Community, Mental Health and Acute Trusts. Servelec Technologies has a range of products that provide end-to-end functionality, from information collection, collation, business optimisation and automated control.

Servelec’s executive management team is backed up by a strong, long standing and experienced operational management team and a highly skilled and knowledgeable workforce.

Servelec has established very close commercial relationships with blue-chip customers in all of its end markets with some relationships dating back 25 years. Servelec’s customers include Welsh Water, Severn Trent, Centrica, BP, EDF Energy, BT and the NHS.

The origins of the Group’s business were in the design and manufacture of control systems for the Sheffield steel industry. This engineering ethos remains firmly in the culture of Servelec, both in software and hardware, and the Group continues to expand its intellectual property portfolio.


Q&A with Alan Stubbs

AN INSIGHT INTO THE SERVELEC GROUP

Why did Singapore want to sell?

A. There are 3 factors to this:

Firstly, the CSE Global Board recognised that being predominately an Oil & Gas business constraints were being placed upon the UK Healthcare operation. This was the result of the inability to provide acquisition funding that would not cause share price depletion in Singapore because of the difference in company valuations.

Secondly, the CSE Global Group wanted to focus on Asia Pacific.

Finally, after investigating a number of ways of removing the constraints on the UK Healthcare business, the outcome of a successful IPO would unlock value and allow funds to be returned to the shareholders.

Why the 100% sell down?

A. Servelec Group had been part of CSE Global since 2000. The working relationship was always very close and I became CEO of the operation in January 2011. As such, under the advice of our IPO sponsor it was agreed to initiate a 100% sell-down to avoid any future perception of Singapore having undue influence over the running of the business because of the close relationship between the management teams.

What is the history of the Group?

A. Servelec was founded in 1977 to provide automation systems for the Sheffield steel industry and expanded soon afterwards to provide safety systems; Emergency Shutdown (ESD) and Fire and Gas Detection systems (F&G) together with Production Control Systems (PCS) for the Oil and Gas industry in the North Sea. In the early 1980s Servelec won a contract in the water industry which moved the business into software development of products (SCOPE 1 and early versions of Seprol RTUs (Remote Telemetry Units)). This contract moved Servelec into the development of its own IP (Intellectual Property). Servelec continued to develop these markets and in 1988 was at the point of winning a large Telemetry contract for Welsh Water, but Servelec did not have the financial strength for such a large project, so the Directors sold the business to Portals (bank note paper makers) which provided the balance sheet strength for the placement of the project with Servelec.

The association with Portals led to a number of acquisitions, creating Portals Computer Technology (PCT) one part of which was Servelec. In the early 1990s a potential acquisition was a Healthcare company. The acquisition did not go ahead, but the Healthcare market, with the setting up of Trusts, looked promising so a market entry plan was developed. In 1993 Servelec entered the UK Healthcare market with a product brought in from New Zealand and was immediately successful in Mental Health and expanded into Community Health and Child Health.

Alan StubbsChief Executive Officer

Our strategic priorities1. Focus on domain expertise2. Continue to develop our

intellectual property3. Increasing market share4. Expand into new adjacent

business sectors5. Expand into international markets

Q&A


eportG


ents

In 1995 Portals was acquired by De La Rue and all the PCT businesses were put up for sale and Servelec went through a MBO supported by 3i. The business continued until 2000 when 3i decided to realise their investment and sold the business to CSE Global of Singapore. In the same timeframe Servelec commenced the development of RiO in conjunction with Somerset Mental Health Trust.

The major markets for Servelec are Oil & Gas, Water and Healthcare. Steel had diminished and the business continued to develop its own IP and market expertise.

A major impact on the business was the commencement of the National Programme for Information Technology (NPfIT) in 2002 which was designed to modernise the NHS. Servelec was not part of this programme, the participants being Accenture, BT, CSC and Fujitsu. Servelec continued to develop all its markets including Healthcare outside of the NHS. In 2005, with a failing National Programme, Servelec partnered with BT to provide an Interim RiO solution in London. The uptake was positive so in 2006 Servelec became a strategic partner of BT for Mental Health, Community Health and Child Health. Fujitsu and Accenture followed, leaving CSC in the North of England and BT in London and the South.

In 2006 Servelec acquired Scomagg to provide a base in power and, in particular, an office in Aberdeen for the North Sea Oil and Gas business. A further acquisition in 2010 of SIA strengthened Servelec’s position as a major Tier 2 supplier to the UK Oil and Gas business.

In 2010, a decision was taken to expand the portfolio of Servelec’s Healthcare business into the Acute market space which was being very poorly served by the National Programme, by the development of Oceano and the start of the partnership with University Hospitals Birmingham (UHB) for their PICS system.

Servelec continues to develop in markets expanding into Nuclear and Broadcast as well as being a major supplier to Oil & Gas, Water, Utilities and Healthcare. In 2013 Servelec acquired Tynemarch which has specific IP (Miser and Pioneer) which, through mathematical modelling, enables our clients to review and change their business operations saving costs and improving the efficiency of the business. Also in 2013, just ahead of the IPO, Servelec acquired Semaphore, an RTU business from CSE Global. We will discuss Semaphore later in this Q&A session.

Finally in December 2013, Servelec listed on the London Stock Exchange.

CORPORATE STRATEGYHow does Automation fit with Healthcare?

A. Servelec started in Automation, where we are a Systems Integrator, providing mission-critical, advanced control systems using our specialised domain knowledge to blue-chip customers mainly in the UK. The business has developed its own IP, initially in Water and subsequently in Healthcare, but all our businesses link to our engineering background with strong project management skills and delivery. Automation has market-leading margins and great opportunities for growth, and is a key division in the Servelec Group.

GROWTH DRIVERSWhat are the growth drivers for Automation?

A. In Automation we see the drivers for growth coming from the demand for energy and the increasing legislation and regulation.

In the North Sea modern drilling techniques have increased the quantities of oil and gas that can be extracted, but these new finds need to be tied-back to an existing platform. But these platforms are old and need refurbishment, which is Servelec’s speciality; brownfield refurbishment. Some companies are considering going a step further, fully automated platforms with remote control from the shore, reducing costs and risks.

The water market is coming under pressure to reduce costs and improve efficiency, especially around water leakage. Servelec with its range of products is ideally placed to capitalise on these opportunities. Selling additional RTUs to improve the monitoring of the water networks so that better, more efficient use can be made of the network. The water companies are looking to reduce electricity and dosing chemical usage and saving money by reducing the leakage of water.

What are the growth drivers for Healthcare?

A. In Healthcare there are three areas of growth; Mental Health and Community Trusts (RiO), PICS and the Acute Sector (Oceano).

The refresh of RiO sites in London and the South combined with sites in the North who either had nothing delivered by the National Programme will refresh in 2015/2016 time frame.

The opportunity for PICS (Clinical Decision Support System developed by UHB) through NHS England’s policy of “safer hospitals, safer wards” where Servelec will work in partnership with UHB to deliver to other Trusts requiring solutions that will deliver excellence in clinical safety.

A third opportunity is Servelec’s move into the Acute market with Oceano. Already successful in A&E, which is also seeing an upturn in demand because of the pressure on A&E departments, the contract to replace iSoft’s iPMS PAS at UHB is on-going and will provide an excellent reference site for Servelec.


AN INSIGHT INTO THE SERVELEC GROUPCONTINUED

COMPETITIVE DYNAMICSWhat is happening with the National IT Programme for the NHS?

A. The National Programme is coming to an end. The contract with BT for London and the South ends October 2015, with the contract with CSC ending one year later. As the end approaches the refresh of all the systems in London and South of England delivered by BT has already commenced with some contracts having already been awarded. In the North of England Trusts which had nothing delivered by the National Programme are already coming to market and we expect this to accelerate as we get closer to the end of the CSC contract.

The competition is growing in Healthcare, how does Servelec defend its position?

A. As the National Programme is coming to an end Servelec has experienced an upturn in enquires for Mental Health and Community systems from Trusts in the North which have not had a system delivered under the National Programme. This meant a change from dealing with a large single client; BT to handling enquires direct from the Trust. This we expected and Servelec prepared by expanding the sales support team. In open competition we have won 10 out of 15 opportunities in the North. However, after losing 2 opportunities we went out and head-hunted a new Sales Director from one of our competitors. Since Lindsay joined Servelec we have won 7 of the last 8 most recent opportunities. We know we are competitive in open competition so when we look at the refresh in London we have a significant advantage. On the sell side we are competitive. On the buy side the Trust can switch to the latest version of RiO overnight. The Trust does not have to re-train its staff. The Trust does not have to extract 5 years plus of clinical data, transform that data for loading into a new system and then verify the data. Therefore the Trust will have significantly reduced costs and most importantly reduced risk.

How do you defend your position in Automation?

A. In Automation we use our deep domain knowledge and own IPR to deliver systems that meet the client’s expectations. Servelec has built long-term relationships with many of our clients to the extent that many of the projects that are awarded to Servelec are single tender. The cost of our systems is insignificant when compared to the costs of not having the system operational, and by ensuring on-time delivery, we deliver a strong ROI to our clients.


Q&A CONTINUED


eportG


ents

regardless of the IPO. The transfer completed in October 2013 and Servelec Technologies was formed encompassing Servelec Systems, Tynemarch Systems and Semaphore. The advantages are the addition of 2 brands of RTU that are designed to address different markets, namely Oil and Gas and Rail. In addition, Semaphore brings a distribution channel for Canada, USA, Europe, China, Thailand, Australia and New Zealand and unlike Servelec Systems the majority of Semaphore sales are via distributors. This ready built channel to global markets can be exploited as a route to market for other products in the Servelec Group.

Do you have plans to make further acquisitions?

A. The growth of Servelec will be a combination of organic growth and acquisitions. We must continue to do the things that we do well, keeping our clients satisfied and winning more project, licence and service revenues. In parallel to this we know that there are companies and products around that could be very helpful in the growth of our business. We have targets, which we continue to follow with a focus on strategic fit, strong management, profit generation and growth potential as part of the Group.

ACQUISITIONS

• Global RTU Design & Manufacture

• Acquired 18 October 2013• Consideration £7.7m• Net Cash Inflow £1.6m

• Business Optimisation• Acquired 5 February 2013• Consideration £3.3m• Net Cash Outflow £1.4m

M & A ACTIVITYHow is the acquisition of Tynemarch progressing?

A. Servelec acquired Tynemarch almost a year ago and it is working well. The reason for the acquisition was Servelec’s strategy to move into business optimisation, a gap that sits between the live real-time world of the Telemetry system and the corporate management systems of our clients. Tynemarch has the expertise and software to allow real-time modelling of our clients’ operations and then advise operations how to reduce operational costs. The savings can be substantial in terms of electricity usage, dosing chemicals and maintenance planning. Servelec Systems and Tynemarch Systems, two parts of Servelec Technologies are working together to improve the operations of our clients to the benefit of both companies.

Where does Semaphore fit?

A. Semaphore is a RTU company that has 2 product lines, Kingfisher from Melbourne, Australia and T-Box from Brussels, Belgium. As part of operational planning in CSE Global, Servelec Systems and Semaphore were going to be combined. The logic of this plan was sound and the Board of CSE Global decided that it should continue and happen


1970s 1980s 1990s

Richard LastNon-Executive Chairman

I am pleased to present my first report on the results for Servelec Group for the year ended 31 December 2013 since its successful IPO and listing on the London Stock Exchange on 2 December 2013.

“Overall, the Group has performed well in 2013 and has reported results in line with expectations set at the time of the IPO.”

OverviewOverall, the Group has performed well in 2013 and has reported results in line with expectations set at the time of the IPO. Revenue for the year ending 31 December 2013 amounted to £42.0m (2012: £39.4m) an increase of 6.7% and profit before taxation of £10.9m (2012: £10.9m). Strong revenue growth of 20% in the Automation division was partially offset by a decline in revenues in the Healthcare divisions, which reported revenues of £14.9m in 2013 compared to £16.7m in 2012, this reduction was due to lower revenues from the National Program for IT (NPfIT) in the National Health Service , which comes to an end in October 2015. Revenues from individual health sector trusts have already started to flow and are anticipated to increase substantially this year and next.

The Automation division, which comprises Servelec Controls (a provider of safety and control systems to the Oil & Gas, Power and Nuclear sectors) and Servelec Technologies (a supplier of Telemetry monitoring and control solutions and products the Utilities and Broadcast sectors) has also performed in line with expectations set at the time of the IPO of the Group, with new project wins in Healthcare and Automation. Revenue for the Automation division for the year ended 31 December 2013 amounted to £27.1m compared to £22.6m in 2012.

As at 31 December 2013, Servelec had net cash balances of £7.5m and had a profit to cash generation of 83%. Although, due to the nature of certain projects and internal investments, the level of cash generation vary month to month, we remain focused on achieving continued good cash generation from operations as we continue to grow and develop the Group.

Servelec timeline

– 1977Servelec founded to provide real-time industrial control systems, predominantly for the Sheffield Steel industry

CHAIRMAN’S STATEMENT

– 1981Commences the design, manufacture and sale of its own RTU

– 1984Enters the UK water market

– 1988Acquired by Portals – Part of Portals Computer Technology

– 1993 Entered healthcare market

– 1995 Portals acquired by De La Rue; Management Buy-Out of Servelec backed by 3i Group plc


eportG


ents

Strategic priorities

1990s 2000 onwards

Corporate DevelopmentDuring 2013, Servelec acquired Tynemarch Limited, a consulting business specialising in cost and performance enhancement to customers primarily in the water industry. Additionally, as part of the separation of Servelec from its Singaporean Parent Company it acquired Semaphore from CSE Global Limited. Semaphore, a developer, manufacturer and supplier of Remote Telemetry Units (RTUs), operates internationally with operations in Belgium, Australia and the USA. Both businesses now operate within Servelec Technologies and help to provide a wider product and service offering to its customers.

In December 2013, Servelec Automation concluded the disposal of its non-core Slovakian operation; the consideration received was not substantial with minimal impact on Group results. The disposal of this business will enable management to focus on more profitable opportunities.

DividendThe Group has traditionally paid dividends to its Singaporean parent company each year. Servelec is committed to having a progressive dividend policy, due to the proximity of the year end to the date of the IPO, it has been decided (as noted in the IPO prospectus) that no final dividend would be paid in respect of the year ended 31 December 2013. A dividend is expected to be paid in respect of the six months ended 30 June 2014, payment would be made in September 2013.

Board and EmployeesI should like to take this opportunity to thank all employees of Servelec for their continued hard work and support during 2013, a year made more difficult by the IPO process which absorbed substantial management time and effort and puts increased stress on organisations involved. During the IPO we have, through the hard work and dedication of our staff, continued to develop our businesses and provide excellent service and support to our customers.

As part of the preparation for the IPO Mr Lim Ming Seong stood down as a Director of Servelec being a Director of the Singaporean Parent Company CSE Global Limited. I should like to thank him and Mr Lim Boon Kheng for their support and guidance to the Company and its management over many years.

I am delighted to formally welcome Roger McDowell and Bernie Waldron as Non-Executive Directors of Servelec. Their support during the IPO process has already been greatly appreciated. I look forward to working with them in the years to come on the growth and development of the Group.

OutlookThe Board looks forward to 2014 with great enthusiasm as it considers Servelec a newly independent business and recently listed on the main market on London Stock Exchange, is well poised to take advantage of the considerable opportunities for growth and development available to it. As at 1st January 2014 the order bank, for delivery in the year, amounted to £38.9m, and represents an excellent start to the year.

– 2000Servelec acquired by CSE Global of Singapore for £18.6m

– 2001Alan Stubbs appointed as Managing Director

RiO launched

The Automation business has started 2014 positively with an increase in the number of projects being quoted for and in the design phase, which we believe will lead to an increase in order placement later in the year. Since acquiring Semaphore in the latter part of 2013, we have engaged its channel partners more fully and believe, with new marketing initiatives already underway, revenues should grow significantly.

In early 2014, the Healthcare Systems business has already started to benefit from order placements from individual NHS Mental Health Trusts for RiO. In addition progress is expected for its acute hospital system and the PICS system which has been developed by the University Hospital Birmingham and for which Servelec has exclusive implementation and support rights. As highlighted in the IPO Prospectus, the Healthcare Systems business will continue to see an unwinding of the NPfIT contract in 2014 and although growth is expected in other areas overall revenue growth in this area will be difficult to achieve in 2014 .

We do though remain excited by the opportunities for this business in 2015 and beyond when the National Program will have come to an end.

A reason for Servelec listing on the London Stock Exchange is to benefit from the wider availability of capital for the development and growth of its business including funding for acquisitions. Organic growth and development of the group is fundamental, we will though look for suitable acquisition opportunities that will enhance and accelerate the overall growth and development of the Group.

– 2006Healthcare commences contract with BT under NPfIT to provide systems to up to 41 Mental Health and Community Health Providers until 2012 (contract subsequently extended to 2015).

Servelec acquired Scomagg for £10m to provide access to the North Sea Oil & Gas market.

– 2010Servelec acquired Systems Integration & Automation Limited for £10.1m

– 2011Alan Stubbs additionally appointed CEO of CSE Global

– 2013Servelec acquired Tynemarch UK (business optimisation software/consultancy) for £3.3m

Servelec acquired the Semaphore Group for £7.7m

Servelec Group listed in the London Stock Exchange

Entire shareholding of CSE-Controls, s.r.o. disposed


Mike CaneFinancial Director


BUSINESS REVIEW

Servelec Group plc was admitted on to the main market of the London Stock Exchange (LSE) on 2 December 2013. After 13 years of ownership by CSE Global Limited of Singapore this was a major step for the business and involved considerable effort from the senior management team, our sponsor, Investec and our advisors. There was potential for significant distraction of the business during the process which commenced with discussions with CSE Global Limited in early 2013, but we are pleased to report that 2013 has been one of solid performance which was in accordance with the targets we set for the year.

2013 Performance SummaryThe challenge for 2013 was to separate Servelec Group from CSE Global Limited of Singapore, change the financial reporting from UK GAAP to IFRS and IPO the company on the main market of the LSE, whilst delivering on the profit, cash generation and operational expectations set for the business. In all aspects it is mission accomplished.• Revenue increased 7% to £42.0m

(FY2012: £39.4m)• Adjusted Gross Margins increased 8% to

£18.4m (FY2012: £17.1m)• Underlying Operating Profit increased

by 1% to £11.3m (FY2012: £11.2m)• Order Entry increased to £32.6m

(FY2012: £31.9m)• Cash conversion increased to 83%

(FY2012: 77%)• EPS fell to 26p (FY2012: 33p) following the

issue of 7,693,000 additional shares prior to the IPO.

Cash generation during the year remained strong and we returned a final dividend of £6.5m to Singapore as we completed the IPO process and retained circa £5m of cash in the business with zero debt. With the delivery and go live of the final version (R2) of RiO on time in October 2013, we have unlocked the work in progress on the BT contract (via National Programme) that will boost our cash collection during 2014.

During 2013 we successfully acquired Tynemarch Systems which enhances our capability to deliver true real-time business optimisation based upon their Miser and Pioneer products combined with the consultancy services provided to assist in the realisation of cost and performance benefits for our clients. In the later part of 2013 we acquired Semaphore from CSE Global Limited and established our Servelec Technologies business which comprises Semaphore, Servelec Systems and Tynemarch. We are pleased to welcome Andy Sullivan who joined the business from Ultra Electronics to head up the Servelec Technologies business.


eportG


ents

Semaphore is a welcome addition to the Servelec Group bringing significant scale to our RTU (remote telemetry unit) business. Semaphore will increase revenues into the Servelec Group in 2014 (FY2013 revenue for Semaphore was circa £9.0m). We now have a global RTU business, operating in a wide range of end user markets including; Broadcast, Oil & Gas, Rail and Water together with a distribution channel covering Canada, USA, Europe, China, Asia, Australia and New Zealand. Our RTU brands now include Kingfisher, Seprol and T-Box.

For 2014 and beyond we now have a position where the Servelec Group is in charge of its own destiny. Our core businesses Automation and Healthcare have opportunities for organic growth which may be augmented if appropriate acquisition opportunities are found. During 2012 and 2013 we invested in our infrastructure and sales resources to ensure that we positioned to capitalise on the opportunities and continue to deliver to our client’s expectations.

We start the year with an order bank of £38.9m (2012: £44.8m).

Current TradingFollowing on from a strong finish to 2013, we have seen an encouraging start to 2014 in both Automation and Healthcare. Sales activity is high across the whole of Servelec Group and we are growing our pipeline and sales funnel which will provide the necessary order entry to meet the expectations set for 2014. Healthcare is particularly active because NPfIT is coming to an end, the RiO Trusts in London and the South have to refresh their IT systems and as the incumbent supplier all our clients are important and so we are going that extra mile to ensure that these remain clients of Servelec Healthcare. We recognise that this will be a difficult challenge as all our competitors are trying to make inroads into our market share. We are particularly pleased to have been selected as preferred bidder on the first 3 Trusts to select a new supplier under the Camden framework; the end of NPfIT in London and the South of England. 2 of these Trusts have also selected

Servelec Healthcare to provide hosting for the RiO system. Healthcare sales activity continues to develop in other parts of the country outside of the Camden Framework, including a recent win for an Accident and Emergency system in Portsmouth.

In Servelec Automation, a number of opportunities are completing their design stage and we are now pricing these projects with an expectation of order placement in the first half of 2014. Semaphore which came into the Servelec Group on the 18 October made little impact upon our 2013 performance but, has made an exceptionally good start to 2014 and when this is combined with recent wins in Servelec Automation we are optimistic of a solid performance in 2014.

CashCash flow from operating activities was £9.1m (FY2012: £8.4m) which was used to pay a dividend of £6.5m (FY2012: £2.0m) to CSE Global Limited.

Acquisitions of subsidiaries resulted in a net cash inflow of £0.2m, following the transfer of the Semaphore Group by issuing shares prior to the IPO.

Capital ExpenditureAs part of the IPO process the 50% of the Healthcare intellectual property previously owned by CSE Global Limited was transferred to Servelec Group plc for a cash settlement of £0.8m.

Other capital expenditure in the year relates to IT and office equipment.

TaxationThe underlying rate of taxation of 18% is below the standard rate of corporation tax of 23.25% primarily due to a provision in prior years within the newly acquired Semaphore business which was released in December 2013 as it was time expired.

Servelec Group also benefits from tax credits on research and development expenditure.

Earnings per ShareOn 18 October 2013 the Group issued 7,693,000 additional shares in order to purchase the Semaphore Group of companies and the Kingfisher IPR from CSE Global Limited prior to the IPO.

At IPO the total shares were converted from £1 shares to 18 pence shares.

The EPS comparison has been stated assuming that all of the shares were converted to 18 pence from 1 January 2012.

Recent Wins:Automation• Airport Refresh Phase 1

Healthcare• Portsmouth A&E:

live in January 2014• 3 Camden Lot 1• 2 Camden Lot 2


BUSINESS REVIEWCONTINUED

Copyright Dŵr Cymru Welsh Water


eportG


ents

2013

2012

2011

38,927

44,817

23,190

2013

2012(1)

2011(1)

18,413

17,126

20,384

Adjusted Gross Margin (£’000s)

2013

2012

2011

11,277

11,165

12,929

Underlying Operating Profit(2)

(£’000s)

2013

2012

2011

32,601

31,874

23,190


Order Bank (£’000s)

2013

2012

2011

41,995

39,361

42,545

Revenue (£’000s)

2013

2012

2011

2,596

2,013

2,251

R&D Investment (£’000s)

2013

2012

2011

10,885

9,585

PBT (£’000s)

10,908

KEY PERFORMANCE INDICATORS

(1) Adjusted for the add back of Royalty Charges levied by CSE Global Limited (note 4)

(2) Adjusted for royalties, share-based payments and amortisation (see page 1)

OutlookWe do not see a change in our gross margin percentage in the near future except for Servelec Controls, where the move to project delivery will see an increase in material purchases in the year, which attract lower margins than manpower. We expect this to reduce the overall gross margin percentage for the Controls business to the low 30% range. Revenue is expected to correspondingly increase.

StrategyOur strategy is made up of 4 distinct elements:

1. Push the organic growth of Automation & Healthcare:We have a broad range of organic growth opportunities that fit with the capabilities of the business. These range from brownfield refurbishment of platforms around our coastline, to efficiency improvements and cost reductions for our utilities clients to the continued delivery of true electronic patient records systems that meet the objectives set by the UK Government and more importantly the needs of our Healthcare Clients as they strive to deliver improved patient care in an environment of ever increasing need.

Our clients are important to Servelec and we have been working with a number of them for many years. In 2014 we’ll strive to maintain client satisfaction thus increasing our level of repeat business and recurring revenues. Procurement activity is now happening across all our markets and we’ll continue to engage pro-actively with the customer procurement processes, with the right resources to ensure the future success of Servelec, in both project wins and their successful delivery.

2. Continue to enhance our product capability:Historically we have invested money into our IPR and this has been written off each financial year generating R&D tax credits in Australia and the UK. In 2013 our R&D spend, excluding Semaphore, was £1.7m (FY2012: £2.6m) and £2.0m in total. Investment in our products will continue in 2014 and we plan to enhance our products to meet the needs of our Clients now and in the future to comply with their demands placed upon them by Legislation, Regulation or changing market requirements.

Our current products are:• RiO Electronic Patient Record for Mental

Health, Community Health and Child Health• Oceano Acute Healthcare Patient

Administration System and Accident & Emergency

• SCOPE-X family of products for Telemetry and SCADA

• Miser – Mathematical Modelling package for Performance Improvement

• Pioneer – Mathematical modelling package focussed on the strategic management of assets

• RTUs (Remote Telemetry Units) – Kingfisher Range of RTUs (Oil & Gas and

Utilities) – Seprol Range of RTUs (Water, Broadcast

and Utilities) – T-Box Range of RTUs (Railways and

Utilities)

A focus for 2014 will be the successful integration of Semaphore and action on a coherent roadmap for RTU developments.

3. Develop our distribution channels to market:Semaphore came with a ready-built distribution channel with distributors in Canada, USA, Europe, China, Thailand, Australia and New Zealand. These assets are there and we now need to develop the range of products that can be pushed to market via this channel. The first target will be the Seprol range of RTUs, but we envisage that this will be expanded to the SCOPE-X product family and our business optimisation products; Miser and Pioneer.

4. Acquire where beneficial to the business:In line with Servelec Group’s policy we continue to search for potential acquisitions that will have long-term benefit to the Group. Our resources need to be used wisely so that any acquisition has both short-term and longer-term benefits. The Group wishes to acquire companies that are consistent with our strategy and where being part of the Servelec Group will provide the acquired company with the potential to grow faster and bigger than as a standalone business.

The review of the KPI’s is discussed in the Business Review.


* Adjusted for the add back of Royalty Charges levied by CSE Global Limited (note 4)

2013

Revenue (£’000s)

Adjusted Gross Margin (£’000s)




2012

2011

14,879

16,747

20,898

2013

2012*

2011*

8,381

9,441

12,399

2013

2012

2011

6,774

7,926

2,911

2013

2012

2011

22,362

30,467

39,288

2013

2012

2011

940

1,785

1,516

SERVELEC HEALTHCAREDIVISIONAL REVIEW

1 OFFICE120 EMPLOYEES35% GROUP REVENUE46% GROUP GROSS

MARGIN

Servelec Healthcare specialises in the design, development and implementation of Electronic Patient Record (EPR) software within secondary care settings and is a market leader in the Mental Health and Community Health sectors in England.

Sue HawkswellManaging Director of Servelec Healthcare Limited


eportG


ents

2012 20132,780

13,976

16,75614,879

10,049

4,830

NPfIT (BT Contract) Other

NPfIT revenue (£’000s)

11,018

290

3,57

1

Revenue split by Licence/Projects

Implementation Services Licence Revenue Support Contracts

DIVISIONAL REVIEW

IntroductionServelec Healthcare operates exclusively in the UK healthcare sector, with the majority of its business conducted in England. The business is built on the delivery of our Patient Administration Software (PAS) and Electronic Patient Record (EPR) software products RiO and Oceano which are designed to support secondary care provider organisations.

The proven RiO software is a cradle to grave electronic patient record specifically designed for Mental Health and Community Health organisations in both the NHS and private sectors. It enables them to deliver cost effective clinical care and to meet key government healthcare objectives such as the paperless agenda and patient empowerment strategies. In these 2 sections of the market we have a leadership position. The Oceano software is targeted at Acute hospitals and focuses on providing modern functionality that addresses the administrative and clinical requirements for acute care. This blends a powerful patient administration engine with unique clinical functionality.

Market Overview The UK healthcare sector comprises primarily the NHS, which deals with circa 1 million patients every day. The Healthcare sector in England (which is significantly the largest portion of the overall UK healthcare sector) is currently implementing significant changes introduced via the Health & Social Care Act 2012, including the abolition of the Primary Care Trusts and Strategic Health Authorities, replaced by the Clinical Commissioning Groups. This has resulted in changes to the way that care is commissioned, which had a short-term impact on our target customer base which has been more focused on organisation mergers and service reconfiguration in order to gain a greater and more secure share of the provider business. Longer term these changes of market structure will enable Servelec Healthcare to capitalise on a broader interoperability agenda that will bring, previously disparate care settings, together and create opportunities for Servelec to integrate its solutions and support its customers in sharing data. This is directly aligned to health market drivers and an area in which Servelec has demonstrated considerable competency in.

“Servelec Healthcare operates exclusively in the UK healthcare sector, with the majority of business within England.”


London North New

PAS only Full EPR

£10m

£2m

£50m

£30m 25m

RiO market opportunities Oceano market opportunities (per Trust)

London North New

PAS only Full EPR

£10m

£2m

£50m

£30m 25m

The other significant change that is occurring within the healthcare market currently is the drawing to a close of the National Programme for IT (NPfIT) which officially comes to an end in 2015/2016. The NPfIT was originally implemented in 2002 and was designed to modernise the NHS. Servelec was not part of this programme, the participants being Accenture, BT, CSC and Fujitsu. Servelec continued to develop all its markets including Healthcare outside of the NHS. In 2005, with a failing National Programme, Servelec partnered with BT to provide an interim RiO solution in London. The uptake was positive so in 2006 Servelec became a strategic partner of BT for Mental Health, Community Health and Child Health and since then has been delivering systems to Trusts in London and the South under this framework.

The end of the National Programme contracts in 2015 and 2016 means opportunities for Servelec Healthcare will increase across all care sectors. Organisations must decommission the systems that have been delivered to them under the National Programme and will procure systems that are more flexible and comprehensive, embracing modern software design that will enable NHS Trusts to position themselves for market challenges up to and beyond 2018. This will provide Servelec Healthcare with increased opportunity for growth in its market sectors of Mental Health and Community Health and allow us to access the market for Acute Care PAS and EPR solutions.

RiO supports 1 million patient interactions per day.

Share of market

55%

3%

42%

Mental Community Acute

SERVELEC HEALTHCAREDIVISIONAL REVIEW CONTINUED


eportG


ents

Size and Growth of Market• Within the Mental Health and Community

Health sectors, as the NPfIT comes to an end, 39 organisations in London and the South will need to refresh their RiO systems by October 2015. There are also significant opportunities for providing new and refreshed systems in the North of England.

• Within the Acute sector only a small percentage of the 161 Acute Trusts in England were delivered a modern system as part of the National Programme for IT. This creates significant growth opportunities for Servelec’s Oceano software.

Market Trends• Greater influence from CCGs is focusing

the market direction towards integration and interoperability. Servelec Healthcare is responding to this by collaboratively working with our customers to enable data-sharing underpinned by our technologies, which in turn is providing our customers with high-value outcomes to support multi-agency working.

• The demand from patients and service users to be more active in managing their own care is a challenge for our customers. Positioning the clinical data with participation in care is driving new behaviours within NHS Trusts. Servelec Healthcare is supporting our customers in this challenge with innovative use of technology to enhance service delivery and meet this agenda.

• The drive to increase service efficiency within healthcare delivery requires technology that supports clinical and administrative needs. Servelec Healthcare responds to these requirements by blending solutions that intuitively link clinical processes with benefits realisation.

Performance In 2013Servelec Healthcare has performed steadily during 2013 and met the expected operating profit targets. The delivery of a major update to the final RiO software upgrade R2 within the National Programme for IT via BT constituted a large proportion of the business in 2013. These updates were delivered in accordance with the agreed timescales to one major Trust and we are now in the process of rolling out to other Mental Health and Community Health Trusts in London and the South of England.

In addition in the first half of 2013 Servelec Healthcare won several major new clients in Northern England and has successfully delivered all systems to agreed timescales. In the second half of 2013 Servelec Healthcare was selected as preferred supplier for the first 2 Trusts exiting the National Programme in London and the South (the Camden Refresh); these will become order entry in Q1 2014. Whilst Servelec Healthcare experienced a drop in revenue in 2013 due to these contracts slipping in to Q1 2014, a number of smaller projects and variations for our existing customers were successfully completed instead, enabling the business to maintain the anticipated profitability.

Opportunities for Servelec HealthcareSafer Hospitals, Safer Wards To support the broader adoption of safe digital record keeping NHS England launched a £500m Technology Enablement Fund and guidance paper (Safer Hospitals, Safer Wards). This places emphasis on improving patient care, providing an integrated care record and reducing patient mortality in Acute hospitals. The University Hospital Birmingham (UHB) product PICS addresses these requirements and Servelec’s collaboration with UHB for the deployment of the PICS software provides Servelec Healthcare with opportunities to expand further and more rapidly into the Acute hospital sector.

Urgent & Emergency Care Review In late 2013, Sir Bruce Keogh, NHS England’s National Medical Director, commissioned a review of urgent and emergency care. It proposed a new blueprint for local services across the country that aims to make care more responsive and personal for patients, as well as to deliver even better clinical outcomes and enhanced safety. Servelec Healthcare’s Oceano ED software, which supports improved patient flow and accurate real-time tracking through the A&E setting, provides a further opportunity for growth within the business within the Acute hospital sector. This capability coupled with Servelec’s dominance in Mental Health and Community Health will enable active data sharing across NHS Trusts to support integrated care pathways for patients and service users.

Paperless NHSThe government has set out objectives for the NHS to become paperless by 2018. To achieve this there will need to be the capability for multiple agency and care sector IT systems to exchange information electronically for patients to be able to access their records on-line and update them and for clinicians to be fully mobilised. RiO and Oceano both have significant capabilities to support organisations working towards these goals.

2014 focus• Gaining Mental Health organisations as

our direct customers as they exit from the National Programme through the sale of our RiO software.

• Gaining Community Health organisations as our direct customers as they exit from the National Programme through the sale of our RiO software.

• Increasing our share of the Acute hospital sector through the sale of our Oceano PAS and Oceano ED systems. Our capability to achieve this is hugely strengthened by the first major deployment of Oceano PAS during the current year at University Hospitals Birmingham (UHB).

• Collaborating with UHB to market and deliver the PICS software which directly aligns to Safer Hospitals, Safer Wards enabling Acute hospitals to deliver significant clinical transformation.

• Working with key customers on strategic R&D for our products to further support NHS policy drivers.

Research and DevelopmentWe continue to focus our research and development teams, which are based in Sheffield, on the provision of web based solutions and application that are aligned to NHS policy drivers and increasingly towards our customers’ transformation programmes. This will provide our customers with technology solutions that will enable them to meet their requirements both operationally and strategically. For example research is focused on providing enhanced clinical functionality that supports intuitive real-time information collection by clinicians.


2013

Revenue (£’000s)

2012

2011

27,116

22,614

21,647

Gross Margin (£’000s)

2013

2012

2011

10,032

7,685

7,985


2013

2012

2011

25,827

23,948

20,279


2013

2012

2011

16,565

14,350

13,016


2013

2012

2011

1,073

811

735

9 OFFICES292 EMPLOYEES65% GROUP REVENUE54% GROUP GROSS

MARGIN

SERVELEC AUTOMATIONDIVISIONAL REVIEW

Financial Highlights

Strategic Report

Governance

Financial Statements

Servelec Group annual report and accounts 2013 21


MARGIN


MARGIN

SERVELEC CONTROLSServelec Controls provides complex, mission critical systems to many large blue chip companies mainly in the Oil & Gas, Power and Nuclear industry sectors. These include providing proprietary software and hardware solutions alongside commercially off the shelf third party products.

Kevan JonesManaging Director of Servelec Controls Limited

Andy SullivanManaging Director of Servelec Technologies Limited

Servelec Technologies designs, manufactures and sells end-to- end telemetry monitoring and control systems to the Utilities (Water, Gas and Electricity), Broadcast and Transport markets. We integrate our own business optimisation software to measure and then change data to run assets more efficiently.

SERVELEC TECHNOLOGIES


2013

2012

2011

5,525

5,441

5,320

2013

2012

2011

15,302

16,276

15,435

Revenue (£’000s)

Gross Margin2013

2012

2011

5,525

5,441

5,320

2013

2012

2011

15,302

16,276

15,435

Revenue (£’000s)

Gross Margin

SERVELEC CONTROLS

Divisional Review Oil & Gas/Nuclear sectorsServelec Controls provides complex, mission-critical systems to many large blue-chip companies mainly in the Oil & Gas, Power and Nuclear industry sectors. We provide software and hardware solutions utilising commercially available off the shelf third-party products.

We are the UK’s largest independent supplier (Tier 2) of safety and production controls systems. The deep domain knowledge of our staff covering the whole lifecycle of a project from engineering services and project management consultancy, through to design, implementation, delivery, installation and then on-going customer support for these complex systems, is seen as a key competitive advantage by our clients.

Servelec Controls has operated mainly in the UK in the Oil & Gas sectors for over 40 years and has well established relationships with both UK and international clients. These range from major blue chip companies through to Tier 1 and Tier 2 contractors and engineering consultants.

Services • FEED – Front End Engineering Design

consultancy• System design and implementation.• Supply of all system materials• Assembly and installation (including in-house

and on-site testing)

• System integration and client witness testing• Continuous long-term support services

(including call-out, upgrade and migrations)

50% of contracts are generated on a fixed price basis, although variations to contract can add value considerably. The remaining 50% are from client consultancy and engineering services both onshore and offshore.

2013 performance2013 was another strong year in terms of revenue and profitability versus expected targets.The gross margin of 36% reflects the high labour content of the revenue in the year.

OutlookThe Controls Group client base will continue to grow across the UK Oil & Gas and Nuclear sectors. Industrial surveys and data from Wood Mackenzie (the energy consultant) and Oil & Gas UK (the Industry trade body) forecast £44bn will be spent on new projects and extending current North Sea assets. These levels of investment have not been seen since the early 1970s.

The offshore marketplace will therefore drive sales growth in 2014, due to the following:• Greater engineering value of contracts• Excellent recurring revenues approximately

50% of all business• Increased safety legislation generates new and

improved safety control system requirements

“Servelec Controls provides a wide range of solutions that are used by clients worldwide.”

DIVISIONAL REVIEW


eportG


ents

Market overview – Oil & Gas/NuclearCompetitive landscapeThe UK competition is limited and diverse. Servelec Controls is growing in strength and is very competitive with regards to market value of projects. This is enhanced with the size of contracts awarded, together with the Quality Standards to which the supplier must be accredited a gives us a competitive edge in the procurement process. It is usual for us to regularly compete against the same companies and we work to ensure that we remain competitive. Some of our major contracts in the Oil & Gas sector are on a single source basis and we normally have long-term framework agreements within the Nuclear Industry.

Industry opportunities and market dynamicsOff/On shore Oil & Gas – UK Waters, North Sea & Southern North Sea and Eastern Irish Sea• Driven by regulation and cost saving

initiatives by blue-chip customers• Health and safety is a critical part of

projects and if an incident occurs it can have enormous repercussions

• Significant investment – £44bn over next 5+ years

• In excess of 300 ageing platforms – major platforms need life extension

• Increased health and safety legislation forcing automation and de-manning

• Government incentives supplement commercial drivers to keep fields producing

• Significant refurbishment opportunities – DCS – PCS, ESD, F&G systems

• We estimate our current addressable on-shore market is c£150m, growing at 5% per annum

Key customersOil & Gas• Centrica Energy and Storage, BP, Shell,

Perenco, Costain, E-on, Total, Apache, Costain, Exxon-Mobil, Siemens, AB

Power and Nuclear• Sellafield, EDF, Costain, Scottish Power, AWE,

MOD and Nuvia• Servelec Controls has worked extensively

across a number of power technologies from thermal (including coal, gas and CHP) to nuclear (both generation and decommissioning) and renewables (including pumped storage schemes)

Routes to marketThe Company has established very strong client relationships during the past 40 years with the majority of the large Oil & Gas and Nuclear providers including BP, Centrica, ExxonMobil, EDF, Sellafield and Costain. We see this relationship-based selling, as a core strength of ours and our long-standing presence provides a real competitive differentiation in the sales process. The vast majority of the project work is single-sourced, having not gone out to tender, and we get a high proportion of revenue coming from repeat sales into the existing customer base.

Servelec Controls focuses on Tier 2 projects, with larger international engineering companies such as ABB, Apache, Emerson and Siemens who focus on large scale roll-outs for new plants or installations, where order size is greater than £10m. For the refurbishment market, where deal sizes are typically £0.5m to £3.0m,

many of the Tier 1 operators use Servelec Controls as a channel to market, due to the group’s strong industry standing.

Servelec Controls provides its clients with a flexible and responsive service as the larger players do not want to allocate resource to smaller deal sizes.

The main driver of spend for our control and safety systems is increasingly more stringent safety legislation. Rigs, platforms and plants cannot be operated without suitable safety systems in place and, as such, Servelec’s offerings are mission critical.

We believe this provides a very attractive outlook for the Servelec Controls business in future years with the addressable market for system refurbishment being £250m/per year and growing at approximately 5% per year, especially in the off-shore market.


2013

2012

2011

7,906

6,338

6,212

2013

2012

2011

2,591

2,244

2,665

Revenue (Excluding Acquisitions) (£’000s)

Gross Margin (Excluding Acquisitions) (£’000s)

Revenue

Gross margin

3,908

1,916

Acquisitions in 2013 (£’000s)

IntroductionServelec Technologies delivers systems to our customers which can comprise products, software and consultancy services. These systems inherently focus on the collection, presentation and exploitation of data through Remote Telemetry Units (RTUs), Telemetry systems and business optimisation software.

Approximately half of Servelec Technologies revenue in 2013 comes from the water industry, but our systems are applicable to any process industry that requires remote monitoring and has a distributed network of facilities. We differentiate from our competitors in being able to offer an end-to-end system from the collection and processing of data (e.g. water flow rates, pumping levels) through to the analysis of the data output that enables improved operational efficiency.

Servelec Technologies has a significant level of IP which we are able to deploy in our system design

• Seprol, Kingfisher and TBox RTU ranges are deployed to collect data from the field

• The SCOPE-X suite of software products are used to structure, filter and present data

• MISER, PIONEER and Tflo software is used to exploit the data to optimise performance

2013 PerformanceServelec Technologies has a high degree of IP, since we design and manufacture our own Remote telemetry units (RTU) and SCADA software systems and we own the business optimisation software for analysing the data that is collected.

Servelec Technologies performed ahead of expectations in 2013. Compared to the previous year, the division saw a 25% growth in revenue and a 15% increase in gross margin on operations excluding acquisitions in the year to 31 December 2013. Tynemarch contributed a further £1.9m in revenue and £0.7m in gross margin following their acquisition in February 2013. Semaphore contributed a further £2.0m revenue at 63% gross margin (this high gross margin due to its practice of allocating costs as OPEX rather than cost of sales) in the period following their acquisition in October 2013. The overall performance of the business including acquisitions was £11.8m in revenue and £4.5m in gross margin (38%).

OutlookMoving into 2014, the key growth driver remains the changing Water industry regulatory backdrop. The regulator Ofwat continues to focus on improved efficiency, reduction of water leakage and an overall lower cost of water production. These are all the areas of specialisation for Servelec’s end-to-end systems,

“Within a range of market verticals, Servelec Technologies delivers real-time business optimisation solutions which are deployed at an asset, site or enterprise-wide level”

SERVELEC TECHNOLOGIES

DIVISIONAL REVIEW


eportG


ents

making us well positioned to benefit from this shift in regulatory focus and the likely increased spend levels. In addition to the water sector, these mission-critical systems are also sold into other utilities and the broadcast industry. By the nature of this mission criticality, customer relationships are inherently long-term and Servelec is responsive and adaptable to support these systems.

The technology suite is applicable across industries that require remote monitoring and have a distributed network of facilities and we expect further new vertical wins going forward. This strategy is enhanced through the acquisition of Semaphore with its global distribution channels and customer base coupled with an established position in other verticals such as rail, and power distribution.

Servelec Technologies sells mainly direct to its customers through relationships built up over many years. Over half of revenue is generated from the current client base placing repeat orders, extensions and new projects. Our end-to-end offering and reputation in the market place gives us a very strong competitive position.

The next spending review is now in focus, with Ofwat having published its AMP6 (Asset Management Period) 2015-2020 methodology in July 2013. The report focused on more efficient supply of water, with the reduction in clean water leakage and reduced costs production (electricity, chemical, resource) a priority. Both Ofwat and Defra have placed strong emphasis on leakage management for the water industry and how this will drive regulation and price controls. We aim to be a beneficiary of this, given that our remote monitoring telemetry systems and business optimisation software gives an end to end system explicitly targeting leakage reduction and more efficient water production.

We estimate that we have circa 2% of the RTU market in the UK, with a circa 20% RTU share in the water market. As a combined RTU and SCOPE-X provider, we estimate a 50% market share in the UK water industry. We also estimate that the current UK RTU estate in the water sector is around 50,000 units with a refresh of RTUs needed approximately every 15 years. Based upon our estimated 20% market share, we are targeting £0.5m to £1.0m revenue per annum. Regulators have also identified 25,000 sites that need to be adopted by the industry before the end of AMP6 in 2020 which is an additional driver for spend on RTUs as these assets get brought into the networks.

Other industries and clients have their own requirements that are driving spend. On the back of the Begg Report (the independent report into the 2010 Heathrow winter resilience enquiry), BAA is looking to replace all of their SCADA systems with SCOPE-X in the next five years. Trinity Lighthouse (Operator and maintainer of Lighthouses around the coast of the UK), a customer of Servelec, will be consolidating its Lighthouse network, as required by government legislation, which will require additional RTUs.

Competitive LandscapeOur competitors fall into our 3 areas of activity: they are either an RTU supplier, both an RTU and central monitoring supplier, or a business optimisation software provider.

We believe that we are the only Company in the UK that offers a complete end-to-end solution, creating what we see as a very distinct competitive advantage. Within the components of this end-to-end service, we see Derceto and Takadu offering business optimisation software.

Schneider and Siemens as the main Telemetry competitors. Broderson, Schneider, Xylem, Technolog and Metasphere are providers of RTUs.

Key CustomersThe acquisition of Semaphore brings the globally recognised TBox and Kingfisher RTU range significantly extending the RTU product range for the business. It also brings long established and effective global distribution channels. Semaphore has operations in Belgium, Australia and Northern America and is thus ideally based to develop Servelec Technologies into non-UK markets.

Semaphore operates across a range of verticals, such as the broadcast market (France Telecom, Spanish Telecomm, Win TV), Oil and Gas (Beijing Gas, Gaz de France), Mining (Alcoa, BHP), Transportation (Queensland Rail, Swiss Railway), Power/Electrical (Shenzhen Power Station, EDT) and Water (Hong Kong Water).

The acquisition of Tynemarch, based in Dorking UK, brings to Servelec market leading business optimisation software and consultancy services. The MISER and PIONEER products have broad and wide deployment in the UK water sector with most UK water companies being a customer of either or both solutions coupled with broader consultancy services. Tynemarch also has a growing international Customer base.

Servelec Systems has long established relationships with UK water companies including Severn Trent Water, Dŵr Cymru Welsh Water, Southern Water, South West Water and Wessex water. In addition, our telemetry systems are deployed by Heathrow Airport, Western Power Distribution, The Environment Agency, The Met Office and Trinity Lighthouse.

Routes to MarketServelec Technologies has established routes to market that support its core businesses. However, these are significantly enhanced through the Technologies grouping itself. In particular, Semaphore provides access to global markets through established distribution channels for the SCOPE-X, MISER and PIONEER products which have to date been largely UK-focussed. In conjunction with this, Semaphore gets better access to the UK market which is currently a small element of its revenue.

R&D InvestmentServelec Technologies has created a differentiated position with a significant and broad range of IP. To sustain and enhance this position we invest accordingly. In 2013 this investment was £1,073,000, or 9% of revenue and is expressed in operating profit. This investment is targeted at enhancing our competitive position and is part of a 5-year technology roadmap. Intended developments are often reviewed with our customers to validate the business case and to ensure customer ‘pull’. A good example of this is the S2000 and S2000micro RTUs which have been developed specifically to meet customer specification and performance requirements for the coming AMP6 period.

In conclusion, we have a strong and growing pipeline of opportunities moving through and beyond 2014. These opportunities include follow-on work under frameworks for UK water Customers, coupled with potential new frameworks in this sector. In addition, we are growing opportunities for global market penetration using the broad IP and integrated solutions now available following the acquisition of Semaphore with its global customer base. Through the acquisition of Tynemarch we are now differentiated from our competitors in being able to provide an end-to-end business optimisation capability which we see delivering growth in the years to come. We will also continue to invest in the development of our product ranges to underpin this growth.


SERVELEC BOARD

CORPORATE GO

VER

NA

NCE

Responsibility– Group executives– Business executives– Monitored function

Compliance– Financial– Business development– Health and safety

How– Internal audit– External audit

AUD

IT

COMMITTEE INTERNAL PROCESS A

ND

AC

CR

EDITATIONS

Servelec Group adopts a formal risk identification and management process designed to ensure that risks are properly identified, prioritised, evaluated and mitigated to the extent that is possible. Risk management is embedded in the operations of the business.

Business operations maintain risk registers compiled and monitored by the Group Quality and Compliance Manager. The Audit Committee reports to the Board on the risk management process, including on matters of internal audit and the evaluation of potential impacts, both financial and reputational.

RISK MANAGEMENT

RISK MANAGEMENT FRAMEWORK

The following risks are, in the opinion of the Board, the principal risks which affect Servelec Group. It is not intended to be a complete analysis of all risks and may change over time.


eportG


ents

RISK MITIGATIONRegulatoryChanges to legislation may cause customers to divert their spending on the Group’s products.

Active consultation with Government Bodies and dialogue with customers on their expected project spend profiles.

Public Sector Healthcare Spending A key driver of the Group’s business is the level of UK Government spending on IT relating to healthcare delivery. The rate of growth in expenditure on healthcare related IT may reduce significantly.

Active consultation with Government Bodies. Continuous improvement of the product offering to meet the long-term government objectives.

Competitor ActivityThe Group may face significant competition from both domestic and overseas competitors.

Maintain strong customer relationships and high service levels.

Internal review of Bid Feedback.

Regular Customer User Groups to understand areas of improvement.

Operational The Group’s business involves providing customers with highly reliable software and hardware. If the software or hardware contain undetected defects the Group may fail to meet its customers’ performance requirements or otherwise satisfy the contract specifications.

The Group has rigorous testing and review processes embedded in the design and development operations of the business. It maintains accredited QA systems which are independently checked on a regular basis.

Accounting Controls The Group recognises revenue on projects based on the percentage complete of the individual project. A key element of this calculation is the estimation of the costs to complete on contracts.

The Group has a strong management system and has regular contract reviews with key management to assess the performance of individual contracts.

PeopleThe ability of the Group to retain and attract appropriately qualified and experienced staff is key to the continued success of the business.

The Group believes it has a flexible benefits package and continually reviews the working environment and overall reward to staff.

Each business regularly matches the future resource requirements to current staff identifying training and recruitment needs.

Active Graduate Recruitment program.

CurrencyThe Group is exposed to translation and transaction foreign exchange risk.

The Group match the revenue and costs of all foreign currency transactions to eliminate, so far as possible, currency exposures.

Foreign exchange policy is monitored by the finance department under policies approved by the Board.

Information TechnologyLoss of data from failure of systems or cyber attack. The Group adheres to security standard BS EN ISO9001: 2008.

We have a tried and tested business continuity plan, physical access controls and multiple backups off site.

Seprol S2000 RTU


CORPORATE SOCIAL RESPONSIBILITY

At the Servelec Group, Corporate Social Responsibility (CSR) is more than just being aware of our impact on the environment. It is also about the development of our employees, how we related to our customers, and our relationship with suppliers and the local communities that we serve.

Within Servelec Group plc, our employees are essential to the success of the business.

Provide young people with excellent development opportunitiesWe work with several universities within the UK on an ongoing basis. Each year we present the business groups, who form the Servelec Group, to the students undertaking the appropriate qualifications, for our business requirements.

The successful student applicants, who are chosen for their placement, soon become a valued member of the team, getting involved in real project work and making an important contribution.

Many of these students return to us for employment following graduation. This allows a smooth integration into the business based upon their placement experience and knowledge gained. We also like to reward our hardworking students with a placement salary and selected bursaries.

Employer of choiceThe retention of our employees, is as important to us as is our recruitment. Our objective is to become an employer of choice. We regularly review our benefits package which currently includes:- pension scheme with company contribution and life cover, flexible working, additional holiday purchase through salary sacrifice and SAYE Share Scheme.

Career development opportunitiesThe ongoing development of our employees is essential and many undertake further training and professional qualifications to Masters and PhD levels, this also assists the business in developing good succession planning processes, which is vital for the growth and development of our business.

Equal opportunitiesThe Group is committed to an equal opportunities policy. The Group aims to ensure that no employee is discriminated against, directly or indirectly, on the grounds of colour, race, ethnic and national origins, sexual orientation or gender, marital status, disability, religion or belief, being part time or on the grounds of age.

EnvironmentWe believe Servelec Group can improve its environmental footprint and save energy. This creates a new value for our customers through sustainable technologies, products

and solutions. Through our continued efforts to understand impacts on the environment from our products, our operations, and our supply chain we work to not only reduce negative externalities but create new opportunities for greater efficiencies.

Environment overviewThrough sustainable technologies we are creating value for our customers, society, and the planet.

Energy consumption and Green House Gas (GHG) emissions are the most important and complex environmental issues for Servelec Group. Energy consumption includes our own operations, and the energy used by our products we market. In 2013 we announce a number of objectives in reducing the GHG, which focus on improving the energy efficiency of our operations, which has continued in 2014.

The innovation in our products and services promote energy efficiency and waste reduction can reduce GHG emissions by users of the products. Innovation is at the core of Servelec Group’s environmental sustainability initiatives. In developing advanced products, solutions, and updated business processes, we are multiplying the impact of the network to create sustainable business models and increased economic opportunity.

Our aim is to build environmental sustainability into each business function and process and, ultimately, into every business decision our employees make around the world. We believe that improved sustainability creates net benefits to our business, our customers, and the planet. Our relationship with our customers is now based on cost, quality, delivery, service, and sustainability.

Environmental sustainabilityThis section describes our environmental sustainability opportunities and challenges and how we manage them to improve our environmental performance. Policies are developed under the following governing principles for environmental sustainability. Servelec Group seeks and maintains ISO14001 certification for sites with significant potential for environmental impact.

An Environment Management System (EMS) refers to the management of an organisation’s environmental impacts and programmes in a comprehensive, systematic, and planned manner.

An EMS:• Serves as a tool to improvement

environmental performance• Provides a systematic way to manage

environmental impacts, and requirements• Addresses immediate and long-term impacts

of an organisation’s activities, products, services and processes on the environment

• Focuses on the improvement of the system and environmental performance

Servelec Group’s EMS is certified to the international EMS standard ISO14001. All of Servelec Group’s ISO14001 certified sites are audited by an independent third party. Sites that were part of an acquisition are included in the scope of the Environmental Policy and group environmental initiatives.

Internal audits of Servelec Group’s EMS provide regular assessments as to whether our environmental processes and commitments have been implemented and how well we are improving our EMS at our certified sites. The frequency of these audits depends on set criteria, such as the size and operational activities at the site. As mentioned, Servelec Group participates in annual external audits by a third party registrar for independent verification and certification of our EMS to the ISO14001 standard. These identify areas of improvement and performance, while providing external validation and verification of our EMS processes.

Waste recyclingAs part of the compliance to ISO14001 a number of our sites ensure that all waste is pretreated prior to disposal. This means that we have to sort it into the different types of waste i.e. mixed dry recyclable waste, glass, batteries, and electrical waste. The Group’s objective is to adopt this approach for all our UK sites and to reduce the general waste to landfill.

Environmental policyServelec recognises the importance of environmental protection and is committed to operating the Group’s business responsibly and in compliance with environmental law, regulation and approved codes of practice applicable to its business activities. The Group’s environmental policy, which is reviewed and (if appropriate) amended each year, outlines the Group’s key environmental impacts, targets and commitments.


eportG


ents

Males Females

Males Females

5

116

Males Females

Gender diversity on the Board

Gender diversity within senior management

38587

Gender diversity within the work force

Gender Diversity

ENVIRONMENTAL CASE STUDYBackgroundCreate a system to capture and record life-cycle carbon footprint data on the business operations, and in turn communicate this information to customers and to promote the reduction of the company’s carbon footprint.

Our approachHaving management systems like the ISO14001 in place gives the customers’ confidence that the company has the controls in place to

provide continuity, good quality and service at the same time as looking after its people and the environment.

Benefits and valueServelec Group aims to be a major leader in engaging customers on climate change issues. It has allowed the company to identify environmental impacts of its operations, and to put in place programmes and initiatives to minimise these impacts.

Servelec proactively seeks to reduce the Group’s environmental impact, with its ultimate goal being to reduce its overall carbon footprint by embedding environmental controls and practices into the daily management of the Group’s operations and encouraging positive behaviour from its employees. The Directors believe that these environmental controls and practices can also benefit the Group’s business, by promoting the efficient use of energy and resources thereby helping to reduce costs.

In 2011, the Company gained certification for its environmental management system to ISO14001:2004 standard which demonstrates to new and existing customers the Group’s commitment to effective environmental management of its operations at a time when customers are increasingly concerned with environmental issues.

The ongoing environmental objectives for the Company are to: • Reduced waste and disposal to landfill• Reduced consumption of energy and water • Develop and engage environment awareness

throughout the organisation

CO2 Reporting

Fuel Type CO2e tonnes

Electricity and gas 3,432

Fuel for Travel 371

Total 3,803

Fuel Type CO2e tonnes

Greenhouse Gas EmissionsIntensity Ratio: 2013

CO2e tonnes per £9.05 of revenue

Note that:• We have reported on all the measured

emissions sources required under The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013

• We have taken the exemption not to include a prior year comparison as this is the first year of disclosure

• Conversion factors for electricity, gas and fuel have been calculated using information detailed on the Carbon Trust website

Cycle to work schemeAs part of our increasing awareness of environmentally sustainable working practices and enhancing our reputation as a progressive employer offering a wide range of flexible staff benefits, Servelec offers employees the chance to participate in the Cycle to Work Scheme.

Community eventsThe Servelec Group is committed to corporate social responsibility and a key aspect of this is the Company’s interaction with the community. Servelec’s corporate mission in charitable donations is to be a caring employer by contributing positively to healthy living and environmental protection in our local community.

Servelec’s Charities and Fund Raising Scheme supports Servelec’s employees in their generosity and fundraising efforts. It involves matching team contributions to registered charities associated with the provision of a healthy lifestyle and environmental improvement in the community.Over the past year, we have donated to several charitable organisations of which collectively cater to the broad needs of the disadvantaged, across the various age groups.

Here are a few examples of events which our employees have been involved with:• Coffee Mornings for Macmillan Cancer Support • Wear it Pink, donating money to the Breast

Cancer Campaign• Movember, a month-long event involving the

growing of moustaches during the month of November to raise awareness of prostate cancer and other associated charities

• London Marathon and Sheffield Half Marathon, raising money for Support Dogs and the Sheffield Children’s Hospital

The strategic report has been approved by the Directors of Servelec Group plc.

Signed on behalf of the Board.

MG CaneCompany Secretary12 March 2014


BOARD OF DIRECTORS

RICHARD LAST Chairman and Non-Executive Director

Biography:Richard joined the Company in 2008 as a Non-Executive Director and was appointed Chairman of the Company later that year. In May 2011, Richard was appointed an Independent Director of CSE Global Limited a Singapore Stock Exchange listed company and the Company’s former holding company. He has over 19 years’ senior experience in information technology having worked at Board level for a number of publicly quoted and private companies in the technology sector. Richard is a Fellow of The Institute of Chartered Accountants in England and Wales.

Appointed to the Board: 2008

ALAN STUBBS Chief Executive Officer

Biography: Alan joined the Group in 1984 as a software engineer focusing on the development of SCOPE 1 for the water industry. Alan has worked across many roles in the Group and in 1995, as engineering director, took part in the management buyout of the business by 3i. In 2000, he was involved in the sale of the Group to CSE Global and was subsequently appointed Managing Director of the Company. In June 2010, he was appointed Chief Operating Officer for CSE Global and in January 2011 took over the role of Chief Executive Officer of CSE Global.

In December 2013, Alan left CSE Global to become Chief Executive Officer of Servelec Group plc following a successful IPO on the London Stock Exchange.

Prior to joining the Group, Alan joined British Steel on its graduate sponsorship scheme. In 1981, he joined Davy McKee Limited based in Sheffield, where, using expertise gained at British Steel, Alan joined a team of rolling mill control system experts providing gauge and shape control for high speed aluminium foil mills.


MIKE CANEFinance Director

Biography: Mike was appointed Finance Director in April 2013 following a 6 month interim assignment. Prior to joining the Company, he was Finance Director of Bullock Construction Limited and SPI Limited and, from 2001 until 2007, held the position of group financial controller at Cleanaway Limited. Mike is a member of the Institute of Chartered Accountants in England and Wales having qualified in 1991 whilst working at Price Waterhouse. He holds a Bachelor of Science (Hons) from the University of Manchester.


ROGER MCDOWELL Senior Independent Non-Executive Director

Biography: Roger joined the Company as a Non-Executive Director on 24 October 2013. Roger spent his executive career in his family’s business, pipeline products distributor Oliver Ashworth, which he joined following university. He was Managing Director for 18 years, leading the business through strong growth, a main market listing and ultimate sale to St Gobain.


BERNIE WALDRONIndependent Non-Executive Director

Biography: Bernie joined the Company as a Non-Executive Director on 1 November 2013. Bernie has more than 30 years’ experience in the global technology marketplace including positions as director of strategy for IBM Corporation, based in New York, general manager of IBM’s industrial sector business for Europe, Middle East and Africa, and Executive Chairman of the former Maersk Data Group of companies, based in Copenhagen.


COMMITTEE MEMBERSHIP

Remuneration Committee

Nomination Committee

Audit Committee


eportG


ents

ANDY SULLIVANManaging Director

Company: Servelec Technologies

Biography: Andy was appointed Managing Director of the Group Company Servelec Technologies in 2013. A Chartered Electrical & Electronic Engineer, Andy has over 25 years’ experience in control and monitoring systems, product development & manufacture and consultancy, predominately in the Utilities sector. For the last 10 years Andy has operated at Senior Management / Managing Director level.

KEVAN JONESManaging Director

Company: Servelec Controls

Biography: Kevan was appointed Managing Director of Servelec Controls in 2010, having joined the Group on the acquisition of SIA in 2010. He has 25 years’ experience in international manufacturing and process engineering at senior management levels and has 10 years’ experience at director level in control system design within the oil & gas, power and nuclear industries worldwide.

SUE HAWKSWELLManaging Director

Company: Servelec Healthcare

Biography: Sue was appointed Managing Director of Servelec Healthcare in 2009. She developed her career in healthcare IT having been a key architect in the development and delivery of patient based information solutions to the NHS and brings over 25 years’ healthcare IT experience. This blend of experience and skill has helped steer Servelec Healthcare to a market leading position today.

SENIOR MANAGEMENT


CORPORATE GOVERNANCE REPORT

Chairman’s introductionDear Shareholder

Servelec listed its Ordinary Shares on the main market of London Stock Exchange on 2 December 2013. The Listing Rules of the Financial Conduct Authority, including the UK Corporate Governance Code (the “Code”), have only therefore applied to the Company since that date. In the months leading up to the listing, the Board implemented a number of measures to ensure compliance with the Code, in particular, provisions relating to the composition of the Board and its principal committees. On Listing, the Board committed itself to the highest standards of corporate governance and to maintain a sound framework for the control and management of the Group. Since the Company only recently listed, it is not practicable to expect full compliance with the provisions of the Code. Accordingly, this report includes a description of how the Company has applied the principles and provisions of the Code since 2 December 2013 and how it intends to apply those principles throughout 2014.


COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE 2012: INTRODUCTIONThe Board is committed to maintaining high standards of corporate governance and maintaining a sound framework for the control and management of the Group.

The UK Corporate Governance Code 2012 (the “Code”) applies to financial years beginning on or after 30 September 2012. A copy of the Code can be found at www.frc.co.uk.

This Report, which incorporates reports from the Audit and Nomination Committees on pages 34 to 36 together with the Strategic Report on 6, the Directors’ Remuneration Report on pages 37 to 47 and the Directors’ Report on pages 48 to 50, describes how the Company has applied the relevant principles of the Code.

The role of the BoardAs at the listing date, the Board consists of 3 Non-Executive Directors (including the Non-Executive Chairman) and 2 Executive Directors. Biographies of all members of the Board appear on pages 30.

The Board is responsible for leading and controlling the Group and has overall authority for the management and conduct of the Group’s business, strategy and development. The Board is also responsible for ensuring the maintenance of a sound system of internal control and risk management (including financial, operational and compliance controls and for reviewing the overall effectiveness of systems in place) and for the approval of any changes to the capital, corporate and/or management structure of the Group.

The Board delegates to management the day-to-day running of the business within defined risk parameters. Board meetings are scheduled to coincide with key events in the corporate calendar and in future this will include the interim and final results and annual general meeting.

The Board has adopted a formal schedule of matters reserved for its approval and has delegated other specific responsibilities to its Committees. This schedule sets out key aspects of the affairs of the Company which the Board does not delegate, including key strategic,

operational and financial issues. All Directors have access to the advice and services of the Company Secretary who has responsibility for ensuring compliance with the Board’s procedures. All the Directors have the right to have their opposition to or concerns over any Board decision noted in the minutes. The Board has adopted guidelines by which Directors may take independent professional advice at the Company’s expense in the performance of their duties.

The Chairman and the Non-Executive Directors met informally without the executives present in the period between the listing on 2 December 2013 and 31 December 2013 and will continue periodically to hold such meetings during 2014 and beyond.

Conflicts of Interests The duties to avoid potential conflicts and to disclose such situations for authorisation by the Board are the personal responsibility of each Director. Each Director is required to ensure that he keeps these duties under review and informs the Company Secretary on an ongoing basis of any change in their respective positions.

On 2 December 2013, the Company adopted new Articles of Association. Article 38 authorises the Directors, for the purposes of Section 175 of the Companies Act 2006, to authorise any potential conflict situation, being a situation in which a Director has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the Company. The Director in question is not counted in the quorum at the relevant meeting of the Board and does not vote on the resolution.

In February 2014, the Board agreed a procedure for dealing with conflicts of interest in relation to matters which are scheduled for Board consideration following which each Director completed a ‘Directors List’ which sets out details of situations where each Director’s interests may conflict with those of the Company (‘situational conflicts’). These lists were subsequently considered and situational conflicts authorised. In addition, Directors are reminded at the beginning of each Board meeting to notify the Board of any further conflicts of interest in accordance with Sections 175, 177 and 182 of the Companies Act 2006.

The Articles of Association of the Company require it to indemnify officers of the Company, including officers of wholly-owned subsidiaries, against liabilities arising from the conduct of the Group’s business, to the extent permitted by law. The Group has therefore purchased directors’ and officers’ liability insurance during the year.

Board committeesSubject to those matters reserved for its decision, the Board has delegated to its Audit, Nomination and Remuneration Committees certain authorities. There are written terms of reference for each of these committees, available on request from the Company Secretary, and separate reports for each committee are included in this Annual Report and Accounts from pages 52 to 93.

Role of the Chairman and Chief ExecutiveThe Board is chaired by Richard Last. The Chairman is responsible for the effective leadership of the Board, having regard for the interests of all stakeholders and promoting high standards of corporate governance. Alan Stubbs is the Chief Executive Officer and is responsible for implementing the Board’s strategy and leading the senior management team. The role is distinct and separate to that of Chairman and clear divisions of accountability and responsibility have been agreed by the Board, and are set out in writing.


eportG


ents

Role of the Senior Independent Director (SID)The Code recommends that the Board of Directors of a Company with a premium listing on the Official List should appoint one of the Non-Executive Directors to be the Senior Independent Director to provide a sounding board for the Chairman and to serve as an intermediary for the other Directors when necessary. The Senior Independent Director should be available to shareholders if they have concerns which contact through the normal channels of the Chairman, CEO or other Executive Directors has failed to resolve or for which such contact is inappropriate. Roger McDowell has been appointed Senior Independent Director.

Board balance and independenceThe Code recommends that at least half the Board of Directors of UK listed companies, excluding the chairman, should comprise Non-Executive Directors determined by the Board to be independent in character and judgement and free from relationships or circumstances which may affect, or could appear to affect, the director’s judgement.

The Board regards all of the Non-Executive Directors as Independent Non-Executive Directors within the meaning of the Code and free from any business or other relationship that could materially interfere with the exercise of their independent judgement. The Board believes that the current directorate will enhance considerably its ability to develop the Group’s operations.

Role of the Company SecretaryMike Cane is the Company Secretary. The role of the Company Secretary is to develop, implement and maintain good corporate governance practices. This includes supporting the Chairman and Non-Executive Directors as appropriate, managing Board and Board committee meetings, facilitating the induction of new Directors, ensuring that appropriate levels of directors’ and officers’ insurance is in place and that the Group is compliant with statutory and regulatory requirements. The written responsibilities of the Company Secretary have been agreed by the Board and set out in writing.

Information, Meetings and attendanceThe Board met on a number of occasions prior to the listing. Since then the Board met once before the financial year end to review operational performance. The Board has a full programme of Board meetings planned for 2014 and intends to meet eleven times. At these meetings, the Board will review the Company’s long-term strategic direction and financial plans and monitor on a regular basis the Company’s performance against an agreed strategy and business plan. In addition, the Board will agree key objectives for the Chief Executive Officer on an annual basis and will then monitor performance against these objectives. So far in 2014, the Board has met twice with full attendance at each meeting.

The Board has an agreed procedure for dealing with conflicts of interest in relation to matters which are scheduled for Board consideration.

The Chairman is responsible for ensuring that the Directors receive accurate, timely and clear information. Prior to each scheduled Board meeting, a pack is circulated in respect of each financial period, which includes an update on key performance targets, trading performance against budget and includes detailed financial data and analysis. Board packs are generally distributed between 3 and 7 days prior to each meeting to provide sufficient time for Directors to review their papers in advance. If Directors are unable to attend a Board meeting for any reason, they nonetheless receive the relevant papers and are consulted prior to the meeting and their views made known to the other Directors.

DevelopmentIn preparation for listing, all Directors received an induction briefing from the Company’s legal advisor, Walker Morris, on their duties and responsibilities as Directors of a publicly quoted company. In addition, the new Non-Executive Directors received full presentations, including the IPO roadshow, and visited key customers and the Group’s principal operating subsidiaries in order to familiarise themselves with the Group.

During 2014, the Chairman will review and agree with each Director their individual training and development needs. In addition, under the guidance of the Chairman the Company Secretary will establish a formal induction training process for new Directors.

Board evaluationGiven that the majority of the Directors were only appointed in the months immediately preceding the listing in December 2013, the Board believes that a meaningful evaluation of the Board can only take place after it has been working together for a reasonable time. An evaluation policy will be developed and implemented before the end of 2014. The Senior Independent Director, Roger McDowell, together with Bernie Waldron, Non-Executive Director, will evaluate the performance of the Chairman, who has been in post since 2008.

Election of DirectorsThe Board can appoint any person to be a Director, either to fill a vacancy or as an addition to the existing Board provided that the total number of Directors does not exceed 10, the maximum prescribed in the Company’s Articles of Association. Any Director so appointed by the Board shall hold office only until the next following annual general meeting and shall then be eligible for election by the shareholders.

In accordance with the Articles of Association, at every annual general meeting of the Company one-third of the Directors or the number nearest to but not exceeding one-third shall retire from office. The Directors to retire shall be those who have been longest in office since their last appointment or re-appointment. The Company intends to continue this practice but will review it regularly.

In the meantime, the forthcoming Annual General Meeting will be the first since the Company re-registered as a public company on 21 October 2013. Accordingly, all the Directors will be offering themselves for election at the AGM to be held at techUK, 10 St Bride Street, London, EC4A 4AD on 29 April 2014 at 9.30am full details of which are set out in the notice of meeting accompanying this Annual Report.

As noted above, the current Board has been in post for only a short period of time and so a formal evaluation of the performance of the Board, its principal committees and the individual Directors would be of limited value. However, pending the development and implementation of a formal evaluation process during 2014, the Board is satisfied that each Director remains competent to discharge his responsibilities as a member of the Board.

External appointmentsThe Executive Directors may accept outside appointments provided that such appointments do not in any way prejudice their ability to perform their duties as Executive Directors of the Company. None of the Executive Directors currently hold any such outside appointments.

The Non-Executive Directors’ appointment letters are not specific about the maximum time commitment, recognising that there is always the possibility of an additional time commitment and ad hoc matters that may arise from time to time, particularly when the Company is undergoing a period of increased activity. The average time commitment inevitably increases where a Non-Executive Director assumes additional responsibilities such as being appointed to a Board committee or as a Non-Executive Director on the boards of any of the Company’s subsidiaries, associated or joint venture companies.


NOMINATION COMMITTEE REPORT

NOMINATION COMMITTEEChairman’s introductionThe Nomination Committee is responsible for identifying and nominating candidates for the approval of the Board to fill Board vacancies and to keep under review the balance of skills, knowledge and experience on the Board to ensure the orderly evolution of the membership of the Board and to make recommendations to the Board on composition and balance. The Committee will be proactive in discharging these responsibilities, cognisant of the importance of succession planning and the need to align Board and executive leadership skills to the Company’s long-term strategy.

Prior to the publication of the prospectus, the Board met on 24 October 2013 to consider the appointments of new Directors. Accordingly, Roger McDowell and Bernie Waldron were appointed to the Board with effect from 24 October and 1 November 2013 respectively.

CompositionThe UK Corporate Governance Code recommends that a majority of the members of a nomination committee should be independent Non-Executive Directors. The Nomination Committee is chaired by Richard Last and its other members are Roger McDowell and Bernie Waldron. The Nomination Committee will meet not less than twice a year.

Roles and responsibilitiesThe Nomination Committee assists the Board in discharging its responsibilities relating to the composition and make-up of the Board and any committees of the Board. It is also responsible for periodically reviewing the Board’s structure and identifying potential candidates to be appointed as Directors or committee members as the need may arise. The Nomination Committee is responsible for evaluating the balance of skills, knowledge and experience and the size, structure and composition of the Board and committees of the Board, retirements and appointments of additional and replacement Directors and committee members and makes appropriate recommendations to the Board on such matters.

The full terms of reference are available on the corporate governance page of the Company’s website at www.servelec-group.com.

What the Committee did in 2013Following consultation by Richard Last, Chairman, with the sponsor and major shareholders regarding its composition, a Nomination Committee was established by a resolution of the Board dated 12 November 2013, at which meeting terms of reference were considered and adopted. The Committee did not meet formally between 12 November and 31 December 2013.

DiversityWhilst the Company pursues diversity, including gender diversity, throughout the business, and the Board endorses the aspirations of the Davies Review on Women on Boards, the Board is not committing to any specific targets. Instead, the Board will engage executive search firms who have signed up to the voluntary code of conduct setting out the seven key principles of best practice to abide by throughout the recruitment process and will continue to follow a policy of appointing talented people at every level to deliver high performance. The Board will also ensure that its own development in this area is consistent with its strategic objectives and enhances Board effectiveness.

REMUNERATION COMMITTEEThe Directors’ Remuneration Report can be found on pages 37 to 47. This Report has been prepared in accordance with the new regulations governing the way in which Directors’ remuneration is voted upon and includes details of the role and composition of the Remuneration Committee.

Audit committeeThe Audit Committee report can be found on pages 35 to 36.

Relations with shareholdersAs part of the IPO roadshow in 2013, the Board met a large number of investors in the United Kingdom. The meetings involved the Chief Executive Officer, Group Finance Director as well as other senior management.

As part of its future investor relations programme, the Group will aim to maintain an active dialogue with its key stakeholders including institutional investors to discuss issues relating to the performance of the Group including strategy and new developments. The Non-Executive Directors are available to discuss any matter stakeholders might wish to raise.

Investor relations activity and a review of the share register are standing items on the Board’s agenda. Reports from analysts and brokers are circulated to the Board. The Chairman and Non-Executive Directors are available to attend investor relations meetings or to request meetings with investors or analysts independent of the Group’s management if required.

Annual General MeetingThe Company’s first Annual General Meeting since listing will take place on 29 April 2014 at 9.30am, techUK, 10 St Bride Street, London EC4A 4AD and the chairmen of each of the Board’s committees will be present to answer questions put to them by shareholders. The Annual Report and Accounts and Notice of the Annual General Meeting will be sent to shareholders at least 20 working days prior to the date of the meeting.

To encourage shareholders to participate in the AGM process, the Company proposes to offer electronic proxy voting through the CREST service and all resolutions will be proposed and voted on at the meeting on an individual basis by shareholders or their proxies. Voting results will be announced through the Regulatory News Service and made available on the Company’s website.

By order of the Board



eportG


ents

AUDIT COMMITTEE REPORT

Chairman’s introductionThe Audit Committee was established by a resolution of the Board dated 12 November 2013, at which meeting terms of reference were considered and adopted. The Board further resolved to appoint Richard Last and Bernie Waldron to the Committee under my chairmanship. Under its terms of reference, the Committee is required to meet at least 4 times in each year at appropriate times in the reporting and auditing cycle. Following listing, the Audit Committee has met three times.

The 2013 financial year has seen a raft of regulatory changes, which have reinforced the role of the Audit Committee to assist the Board discharge its duty to ensure that the 2013 Annual Report, taken as a whole, is fair, balanced and understandable. In this report, I explain how the Committee has discharged these responsibilities, with specific reference to the requirement of the UK Corporate Governance Code, (the “Code”) to address significant financial statement reporting issues and to explain how the Committee assessed external audit effectiveness and safeguards in relation to the provision by the auditor of non-audit services.

Roger McDowellChairman, Audit Committee

CompositionThe Code recommends that an Audit Committee should comprise at least 3, or in the case of smaller companies, 2 independent Non-Executive Directors (other than the chairman) and that at least 1 member should have recent and relevant financial experience. The Audit Committee is chaired by Roger McDowell and its other members are Richard Last and Bernie Waldron. By virtue of his former executive and current non-executive roles, details of which are set out on page 30, the Directors consider that Roger McDowell has recent and relevant financial experience. The Company is therefore compliant with the Code in this regard. The Chief Executive Officer and Finance Director attend meetings of the Audit Committee by invitation.

Roles and responsibilitiesThe Audit Committee assists the Board in discharging its responsibilities with regard to financial reporting, external and internal audits and controls, including reviewing and monitoring the integrity of the Group’s annual and interim financial statements, reviewing and monitoring the extent of the non-audit work undertaken by external auditors, advising on the appointment of external auditors, overseeing the Group’s relationship with its external auditors, reviewing the effectiveness of the external audit process and reviewing the effectiveness of the Group’s internal control review function. The ultimate responsibility for reviewing and approving the annual report and accounts and the half-yearly reports remains with the Board. The Audit Committee will give due consideration to laws and regulations, the provisions of the UK Corporate Governance Code and the requirements of the Listing Rules.

The Board has requested that the Committee advise them in ensuring that the financial statements, when taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s performance, business model and strategy.

The full terms of reference are available on the corporate governance page of the Company’s website at www.servelec-group.com.

Activities of the Audit CommitteeAs explained above, the Committee met three times following listing. In January, the Committee discussed with the external auditor the audit planning report, with particular reference to significant risks highlighted in the planning document, together with the audit scope and timetable. In February, the Committee discussed the progress of the audit and reviewed the draft auditors report. On 11 March 2014, the Audit Committee reviewed and approved for consideration by the Board the financial results for the year ended 31 December 2013. As part of that

review process, the members of the Committee were provided with a draft of the full annual report enabling them to ensure that the numbers therein are consistent with those in the financial statements or are sourced from appropriate data. More importantly, the Committee assessed whether the words used were consistent with their understanding of the Company’s business obtained through Board and Audit Committee meetings and other interaction they had had with management, using their experience to assess whether the annual report taken as a whole is fair, balanced and understandable. This additional review by the Audit Committee, supplemented by advice received from external advisors during the drafting process assisted the Board in determining that the report is fair, balanced and understandable at the time that it is approved. The Committee considered the appropriateness of preparing the accounts on a going concern basis, including consideration of forecast plans and supporting assumptions and concluded that the Company’s financial position was such that it continued to be appropriate for accounts to be prepared on a going concern basis.

Significant issues considered in relation to the financial statementsThe Committee, together with the Board considered what were the significant risks and issues in relation to the financial statements and how these would be addressed.

Revenue Recognition Revenue recognition on long-term contracts relies on estimates of the costs to complete for each project and so has an inherent risk of misstatement in the financial statements. The Group has a clear revenue and profit recognition policy (see note 2) and performs regular contract reviews with key staff.

We reviewed the control procedures and performed detailed reviews of significant contracts and analytical review of the profit and loss account.

Acquisition of SemaphoreThe valuation of assets, intangibles and the disclosure in the financial statements of the Semaphore acquisition were considered a risk due to the inherent nature of valuing these types of assets.

An independent consultant was used to calculate the value of the intangible assets, based on management’s assumptions. We reviewed the methodology and assumptions underlying the valuations and the appropriateness of any fair value adjustments.

Assessment of effectiveness of external auditThe Audit Committee oversees the relationship with the external auditors and considers the re-appointment of the Company’s auditors, Ernst & Young LLP, before making a recommendation to the Board to be put to shareholders. As part of this responsibility, the Committee approved the audit plan for the year ended 31 December 2013 and reviewed the auditor’s findings and management representation letters. Prior to recommending the appointment of Ernst & Young at the forthcoming AGM to the Board, the Audit Committee conducted a review of the external auditor’s performance and ongoing independence taking into consideration input from management, consideration of responses to questions from the Committee and the audit findings reported to the Committee. Based on this information, the Committee concluded that the external audit process had been efficiently run and that Ernst & Young continued to prove effective in its role as external auditor.

Approach to appointing the external auditor and how objectivity and independence are safeguarded relative to non-audit servicesAs noted earlier in this report, the Audit Committee was constituted on 12 November 2013 ahead of admission to the main market of the London Stock Exchange on 2 December 2013. In the period leading up to the listing, the Board implemented a number of measures to the governance of the Company to ensure compliance with the UK Corporate Governance Code, in particular, those relating to Board and committee composition. However, a number of policies remain to be


developed and implemented including, with regard to the work of the Audit Committee, the following:• A policy on the independence of the external auditor consistent with

the ethical standards published by the Audit Practices Board• A policy on the engagement of external auditors for the provision of

non-audit services

It is the Board’s intention to adopt policies covering both these topics during 2014.

Independence safeguardsIn accordance with best practice and professional standards, external auditors are required to adhere to a rotation policy whereby the audit engagement partner is rotated after 5 years. The current audit engagement partner was appointed in 2013. The external auditors are also required periodically to assess whether, in their professional opinion, they are independent and those view are shared with the Audit Committee.

The Committee has authority to take independent advice as it deems appropriate in order to resolve issues on auditor independence. No such advice has to date been required.

Independence assessment by the Audit CommitteeBased on the fact that the audit engagement partner rotation policy has been complied with, the Committee is satisfied that the independence of the external auditor is not impaired. Furthermore, the level of fees paid for non-audit services does not jeopardise their independence and separate external firms are engaged for taxation advisory.

The audit committee noted that the auditor had provided services on the IPO transaction that were paid by the previous parent company, CSE Global Ltd.

The Committee has assessed the performance and independence of the external auditor and recommended to the Board the re-appointment of Ernst & Young LLP as auditor until the conclusion of the AGM in 2015.

Internal auditThe internal audit function is currently being reviewed. The focus of the role is currently on quality assurance rather than providing assurance on the adequacy of internal control and risk management processes across the Group’s operations. During 2014, under the guidance of the Audit Committee, there are plans to provide additional training to the Quality Assurance auditor to facilitate the conduct of a structured programme of reviews of risks faced by the Group.

Internal control and risk managementThe Board is responsible for the overall system of internal controls for the Group and for reviewing its effectiveness. It carries out such a review at least annually, covering all material controls including financial, operational and compliance controls and risk management systems.

The system of internal controls is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.

Operating policies and controls are in place and have been in place throughout the financial year under review, and cover a wide range of issues including financial reporting, capital expenditure, information technology, business continuity and management of employees. Detailed policies ensure the accuracy and reliability of financial reporting and the preparation of financial statements including the consolidation process. The key elements of the Group’s ongoing processes for the provision of effective internal control and risk management systems, in place throughout the year and at the date of this report, include:• Regular Board meetings to consider matters reserved for the

Directors’ consideration

• Regular management reporting, providing a balanced assessment of key risks and controls

• An annual Board review of corporate strategy, including a review of material business risks and uncertainties facing the business

• Established organisational structure with clearly defined lines of responsibility and levels of authority

• Documented policies and procedures• Regular review by the Board of financial budgets, forecasts and

covenants with performance reported to the Board monthly• A detailed investment process for major projects, including capital

investment coupled with a post-investment appraisal process

In reviewing the effectiveness of the system of internal controls, the Committee will, going forward:• Receive self-assurance statements from senior managers responsible

for the principal business units confirming that controls and risk management processes in their business units have been operated satisfactorily. These returns will be reviewed by the Audit Committee and challenged where appropriate. The Finance Director will be responsible for compiling and maintaining a risk register to monitor all of the risks facing the business. The key risks will then be summarised for review and approval by the Audit Committee for inclusion in the annual report and accounts; and

• Regularly review the financial and accounting controls;

In respect of the Group’s financial reporting, the Finance Department is responsible for preparing the Group financial statements using a well-established consolidation process and ensuring that accounting policies are in accordance with International Financial Reporting Standards. All financial information published by the Group is subject to the approval of the Audit Committee.

There have been no changes in the Company’s internal control during the financial year under review that have materially affected, or are reasonably likely to materially affect, the Company’s control over financial reporting.

The Board, with advice from the Audit Committee, is satisfied that an effective system of internal controls and risk management are in place which enable the Company to identify, evaluate and manage key risks and which accord with the guidance of the Turnbull Committee on internal control updated by the FRC in 2005. These processes have been in place since the start of the financial year and up to the date of approval of the accounts. Further details of risk management frameworks and specific material risks and uncertainties facing the business can be found on pages 26 to 27.

WhistleblowingThe Group has in place a whistleblowing policy which encourages employees to report any malpractice or illegal acts or omissions or matters of similar concern by other employees or former employees, contractors, suppliers or advisors using a prescribed reporting procedure. The policy facilitates the reporting of any ethical wrongdoing or malpractice or suspicion which may constitute ethical wrongdoing or malpractice. Examples include bribery, corruption, fraud, dishonesty and illegal practices which may endanger employees or third parties. There have been no instances of whistleblowing during the year under review.

AccountabilityThe Board is required to present a fair, balanced and understandable assessment of the Company’s financial position and prospects. The responsibilities of the Directors and external auditor are set out on pages 51 to 53. As set out in the Directors’ Report, the Directors consider the Company’s business to be a going concern.

Roger McDowellChairman, Audit Committee

AUDIT COMMITTEE REPORTCONTINUED


eportG


ents

REMUNERATION REPORT

Information not subject to audit:CHAIRMAN’S ANNUAL STATEMENT

Dear Fellow ShareholderI am pleased to introduce the Directors’ Remuneration Report for the 2013 financial year-end. This Report has been prepared in accordance with the new Schedule 8 to the Large and Medium-Sized Companies and Groups (Accounts and Reports) Regulation 2008. The Directors’ Remuneration Policy will be subject to a binding vote at the forthcoming Annual General Meeting whilst the Annual Report on Remuneration and the Annual Statement will be the subject of an advisory vote.

The Chairman’s statement (on pages 10 to 11) provides a summary of the progress the Group has made over the year and since Listing. In order to continue building on this performance the Remuneration Committee is committed to structuring executive remuneration that supports the Group’s strategy and performance. Short-term performance is incentivised via an annual bonus, part of which will normally be deferred and paid in shares. Long-term performance is incentivised via a long-term incentive plan (LTIP) which is based on achieving Total Shareholder Return (TSR) and Earnings per Share (EPS) growth over a 3-year measurement period. Following Admission on 2 December 2013 the Remuneration Committee made awards over shares to the Executive Directors under the LTIP. Details of the bonus schemes and LTIP awards to the Executive Directors are summarised in the relevant sections of this report.

We are not proposing any material changes to the remuneration policy, as set out in the Listing Prospectus, for the current financial year. However given the Company only listed a few weeks before the year end the Remuneration Committee will need to keep the policy under review to ensure that it remains appropriate to the delivery of long-term value for all stakeholders. The Committee is however confident that the policy to be put to a shareholder vote at the AGM provides the management team with sufficient encouragement and incentive to build on the success the Group has achieved to date.

Bernie WaldronChairman, Remuneration Committee 12 March 2014

DIRECTORS’ REMUNERATION POLICYThis part of the Directors’ Remuneration Report sets out the remuneration policy of the Company and has been prepared in accordance with The Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013 (“the Regulations”). The policy has been developed taking into account the principles of the UK Corporate Governance Code 2012 and was set out in the Admission Prospectus. The Remuneration Policy, as outlined in this report will be applied for the current year and beyond and will be put to a binding vote at the 2014 annual general meeting, and, subject to it receiving majority shareholder support, the effective date of the policy will be the date of the AGM, 29 April 2014.

Policy on executive remunerationThe Group’s remuneration policy seeks to ensure that the Company is able to attract, retain, and motivate its executives and senior management. The retention of key management and the alignment of management incentives with the creation of shareholder value are key objectives of this policy.

Setting base salary levels for Executive Directors at an appropriate level is a key to managerial retention. Therefore, the Remuneration Committee seeks to ensure that salaries are market competitive for comparable companies. Total compensation is set within a range around the median level for the Company’s peer group.

The Remuneration Committee is directly responsible for setting the remuneration of Executive Directors and giving guidance on the remuneration of other members of the senior management team.

KEY ELEMENTS OF REMUNERATION

Remuneration element Purpose Operation Potential Remuneration Performance metrics

Base Salary To attract and retain key executives

Reviewed annually and fixed for 12 months commencing on 1 January each year. The review is influenced by:

• Role, experience and performance

• Average workforce salary adjustments

• Comparison with the Company’s peer group

Salaries are benchmarked by reference to companies of similar size and complexity.

The Executive Directors’ salaries will be reviewed taking account of the benchmarking.

The CEO’s salary is currently £275,000.

The CFO’s base salary was increased from £110,000 to £140,000 effective from 1 January 2014.

There are no proposed salary increases for either executive director during the 2014 financial year.

Not applicable.


REMUNERATION REPORTCONTINUED

KEY ELEMENTS OF REMUNERATION

Remuneration element Purpose Operation Potential Remuneration Performance metrics

Benefits To attract and retain key executives.

An Executive Director is entitled to life assurance, a company car, medical insurance and permanent health insurance.

No maximum is set but the Remuneration Committee will monitor the overall cost of the benefits package.

Not applicable.

Pension To attract and retain key executives.

The Executive Directors are members of the Group Retirement Benefits Scheme (a money purchase pension arrangement).

Contributions of 15% and 4.5% per annum of salary are paid into the scheme on behalf of the CEO and CFO respectively.

Not applicable.

Annual Bonus To incentivise delivery of the Group’s annual financial and strategic targets.

Aligns Directors’ interests with shareholders.

Performance is measured on an annual basis for each financial year.

Targets are established at the beginning of each year that are based on the corporate targets. At the end of the year the Committee determines the extent to which these were achieved.

Bonus payments may be paid in cash. However, the Directors will normally be required to participate in the Deferred Share Bonus Plan with a third of any annual bonus being paid in shares that vest 2 years after the award is made.

Bonuses are capped at a maximum of 100% of salary.

Clawback may be applied to the number of shares, at the discretion of the Committee, if the financial results used to determine the value of the bonus are found to be misstated or if other exceptional circumstances exist, for example, a participant’s material misconduct.

Any bonus is discretionary and subject to achievement against targets set by the Remuneration Committee.

Measures and associated targets will be set and weighted each year in accordance to business priorities. Measures may include financial and non-financial metrics as well as the achievement of personal objectives.

The Committee has the discretion to adjust the formulaic bonus outcome both upwards and downwards to ensure alignment of pay with the underlying performance of the business over the financial year.

Long-Term Incentive Plan To motivate executives and incentivise delivery of performance over the long-term and to facilitate share ownership.

The LTIP is a performance and service-related conditional share award plan.

Initial awards were made on Admission and vest in the financial year 2016 on the date the Remuneration Committee determines the extent to which the performance condition has been met.

The Remuneration Committee would in normal circumstances expect to award LTIPs annually at a maximum of 100% of base salary. Because substantial LTIPs were awarded on Listing in December 2013, the Remuneration Committee do not intend to grant any further awards to the current executive directors in 2014. The extent of vesting is determined by the performance condition.

Clawback may be applied, at the discretion of the Committee, in the event of material misstatement of the financial results or if other exceptional circumstances exist, for example, material misconduct.

For the initial awards in December 2013, 50% is linked to growth in earnings per share above inflation measured over a 3-year performance period whilst the remaining 50% is linked to total shareholder return from Admission until the date when the Remuneration Committee determines the extent to which growth in earnings per share has been satisfied. Further details are set out in the Annual Report on Remuneration on pages 43 to 47.

For future annual awards, the Remuneration Committee will assess what measures and targets best support the long-term focus of the company, and it is therefore possible that these measures and targets will be different from those used for these initial awards.


eportG


ents

Policy for other employee arrangements

Save As You Earn share option plan

To motivate and facilitate share ownership.

An ‘all-employee’ share option plan, approved by HMRC, supervised by the Remuneration Committee.

Employees, including Executive Directors, may enter into a savings contract under which they agree to save up to a maximum of £250 per month (or such limit as may be permitted by the tax legislation governing SAYE schemes from time to time) for 3 to 5 years.

Not applicable.

Executive Share Option Plan To motivate and facilitate share ownership.

Options to acquire shares may be granted to eligible employees at the discretion of the Remuneration Committee.

Following Admission, options were granted to certain senior managers and employees, not Executive Directors. Part A of the ESOP has been approved by HMRC for tax purposes. It is not intended to grant awards under this scheme to Executive Directors.

The number of shares in respect of which options can be granted is limited in respect of any financial year to shares with a market value of no more than 100% of salary. The aggregate market value of shares at the date of grant in respect of which unexercised options can be held at any time under the HMRC-approved scheme cannot exceed £30,000.

The Remuneration Committee may impose 1 or more objective conditions on any option preventing its exercise unless and until such condition has been satisfied. The Remuneration Committee, prior to the grant of the option, will determine such performance conditions. No options have to date been granted to Executive Directors under this scheme.

Chairman and Non-Executive Directors

To attract and retain Non-Executive Directors of the right calibre.

The Chairman and Non-Executive Directors’ remuneration comprises only fees.

The Chairman’s fee is approved by the Board on the recommendation of the Remuneration Committee.

Fees for the Non-Executive Directors are approved by the Board on the recommendation of the Chairman and Executive Directors. The Non-Executive Directors are not involved in any discussion or decision about their own remuneration.

Additional fees, over and above the base fee for the Non-Executive Directors, are payable to the chairmen of the Audit and Remuneration Committees and to the Senior Independent Non-Executive Director.

The Chairman and the other Non-Executive Directors are entitled to reimbursement of reasonable expenses.

Details of the fees currently payable are set out in the Annual Report on Remuneration on page 41. The fees are reviewed periodically taking into consideration the time commitment and responsibilities of the role and fees paid in other companies of comparable size and complexity.

Not applicable.

Alignment of executive remuneration and the marketPrior to the IPO, the Company engaged h2glenfern, a remuneration advisory practice, to undertake a benchmarking exercise for use in considering remuneration levels and developing the Board’s remuneration policy in respect of both the Board and senior management. H2glenfern compiled a comparator group drawn from the Official List and AIM, which was agreed with the Board. The companies selected are well-known companies in the technology sector with market capitalisations and revenue/profit profiles in a broad range around Servelec’s market capitalisation and business size, recognising that Servelec will compete with these companies for executives and senior managers and be assessed against them and compete with them for investment.

The resulting remuneration structure reflects the Company’s financial and corporate circumstances and plans and, the Board believes, will be effective and competitive and reflect the objectives of shareholders.


REMUNERATION REPORT

CONTINUED

How employee pay is taken into considerationWhen setting pay and benefits for Executive Directors and senior managers, the Remuneration Committee takes account of pay and conditions across the Group. The Company endeavours to provide competitive remuneration packages for all employees and carries out internal benchmarks for employees. All Employees are eligible to join the SAYE scheme and may be eligible to join the all employee ESOP at the discretion of the Remuneration Committee.

The Company has not consulted with its employees in formulating this policy.

Shareholder views on remunerationAs the Company was a private limited company prior to the IPO in December 2013, the Annual General Meeting in 2014 will be the Company’s first such meeting. Accordingly, there is no history of the Company having had to prepare a remuneration report to be put to an advisory vote and therefore there is no history of shareholder voting on remuneration issues. Remuneration policy details were however provided in the Pathfinder Prospectus and the Admission Document prior to Listing. Going forward, the Chairman of the Remuneration Committee will be available for contact with institutional investors concerning the Company’s approach to remuneration. The Company welcomes dialogue with its shareholders and will seek the views of its significant shareholders if and when any major changes are being proposed to the policy. When any significant changes are proposed to the remuneration policy, the chairman of the Remuneration Committee will consult with major shareholders in advance and, if requested, will arrange meetings to discuss these.

Policy on recruitmentThe Committee will consider the remuneration of new executive appointees to the Board by reference to the Remuneration Policy set out above. The Committee would not usually expect to pay sign-on payments or compensate new directors for any variable remuneration forfeited from any employment prior to joining the Board but may consider doing so depending on the circumstances, recognising that the Company needs to attract appropriately skilled and experienced individuals. Generally, any buy-outs of awards forfeited would be made on a comparable basis using the LTIP, within its parameters stated in the policy table, so as to align the new executive director’s interest with that of the shareholders. Salary will be set so as to be competitive with comparable companies and taking account of the experience and seniority of the appointee coming into the new role. New Executive Directors will receive benefits and pension contributions in line with Company’s existing policy and will be able to participate in the annual bonus scheme on a pro-rated basis for the portion of the financial year for which they are in post.

Policy on loss of officeDirectors and senior executives leaving employment from the Group, other than in circumstances of gross misconduct, will be entitled to receive salary in accordance with their notice periods and pro-rated annual bonus based on performance to the date of leaving The notice periods and the contractual rights on termination of each Director are set out in the section on service agreements on page 41. In this regard, it should be noted that the Chief Executive’s notice period (12 months on either side) may be extended to 24 months following a change of control of the Company. The Company’s share schemes also provide leaver provisions as follows:

SAYE (Save as You Earn) An Executive Director who ceases to be a Director or employee of the group by reason of death, retirement, ill-health, injury or disability, redundancy, or the sale of the company or business for which he works will be a good leaver. As such he will be permitted to exercise his options.

If the Director ceases to be an Employee or Director either before the third anniversary of the grant of the award for any reason other than the good leaver reasons above or more than 3 years after the grant of the award as a result of being summarily dismissed, any Option granted to him shall lapse on such cessation.

ESOP (Executive Share Option Plan) An Executive Director who ceases to be a Director or employee of the group by reason of death, retirement, ill-health, injury or disability, redundancy, or the sale of the company or business for which he works will be a good leaver. As such he will be permitted to exercise his options.

Where the cessation is on any other grounds, awards will lapse, provided that the Committee has discretion to treat the Executive Director as a good leaver.

Awards held by good leavers that are already capable of exercise at the date of cessation may be exercised between 6 and 12 months (depending of the reason for leaving) of the leaving date. If the good leaver ceases to be an employee or Director before the third anniversary of the grant of the award the Committee has discretion to allow the award to vest on the normal vesting date.

DSBP (Deferred Share Bonus Plan) Share awards, which represent deferrals of previously earned bonus, lapse on the Executive Director resigning or giving notice of resignation. An Executive Director who ceases to be a Director or employee of the group by reason of death, retirement, ill-health, injury or disability, redundancy, or the sale of the company or business for which he works will be a good leaver. Awards will be subject to time pro-rating.

LTIP (Long-Term Incentive Plan) An Executive Director who ceases to be a Director or employee of the group by reason of death, retirement, ill-health, injury or disability, redundancy, or the sale of the company or business for which he works will be a good leaver. Where the cessation is on any other grounds, awards will lapse, provided that the Committee has discretion to treat the Executive Director as a good leaver. Awards held by good leavers will continue and will vest on the normal vesting date, unless the Committee decides to accelerate vesting. Awards will remain subject to the performance conditions and, unless the Committee determines otherwise, subject to time pro-rating.

External appointmentsIt is the Board’s policy to allow Executive Directors to accept directorships of other quoted and non-quoted companies provided that they have obtained the consent of the Chairman of the Company. Any such directorships must be formally notified to the Board.


eportG


ents

Service agreements

Alan Stubbs Mike Cane

Date of Service Agreement 12 November 2013 12 November 2013

Notice Period 12 months’ notice given by either party. This notice period extends to 24 months following a change of control of the Company

6 months’ notice given by either party

Basic Salary Currently £275,000 reviewed annually Currently £140,000 reviewed annually

Bonus Purely discretionary and not part of the contractual remuneration

Share Schemes May participate in any share scheme adopted by the Company

Pension Contributions Equivalent to 15% of salary contributed by the Company into the Company’s Group Retirement Benefit money purchase scheme

Equivalent to 4.5% of salary contributed by the Company into the Company’s Group Retirement Benefit money purchase scheme

Contractual Benefits Car, Life Assurance (4 x Salary),Medical and permanent health insurance, 12 months’ base pay for sickness

Car, Life Assurance (4 x Salary),Medical and permanent health insurance, 6 months’ base pay for sickness

Termination payments Company has discretion to pay a payment in lieu of notice to terminate the employment forthwith in the event of notice being given by either party. This will include the appropriate pro rata amount for pensions contributions and contractual benefits

Chairman and Non-Executive DirectorsThe remuneration of the Chairman of the Company and the Non-Executive Directors consists of fees that are paid via the payroll, with the exception of the Chairman who invoices the Company for his fees. The Chairman and Non-Executive Directors are not entitled to receive any compensation on termination of their employment and are not entitled to participate in the Servelec Share Schemes or any of the Group’s bonus or pension schemes. Neither the Chairman nor any of the Non-Executive Directors has a service contract with the Company; however each has entered into a letter of appointment with the Company.

Non-Executive Directors’ fees and letters of appointmentThe Non-Executive Chairman has a letter of appointment stating that his appointment is expected to last at least three years from Admission to Listing. On their initial appointment, each of the Non-Executive Directors signed a letter of appointment with the Company for an initial period of 3 years from Admission. The letters of appointment of all serving Non-Executive Directors have been drafted in accordance with provision B.7.1 of the UK Corporate Governance Code, thus obliging directors to be subject to election by shareholders at the first annual general meeting after their appointment and to re-election thereafter at intervals of no more than 3 years. The amendments have been drafted such that renewed appointment will not necessitate a new letter of appointment.

Each Non-Executive Director is expected to commit sufficient time in fulfilling their duties as a Director of the Company. A base fee is paid to each Non-Executive Director to reflect the time commitment and level of involvement they are required to make in the activities of the Board as a whole. In addition to their annual base fees additional fees are paid for chairing the Board committees and for the role of Senior Independent Non-Executive Director:

Base Fee£’000

Senior Independent

NED£’000

Remuneration Committee

Chairmanship £’000

Audit Committee

Chairmanship£’000

Total£’000

Richard Last 90 – – – 90Bernard Waldron 40 – 2.5 – 42.5Roger McDowell 40 5 – 2.5 47.5

Unless otherwise determined, the Director concerned may give not less than 3 months’ notice of termination of the appointment. Copies of the Directors’ letters of appointment and service agreements are available for inspection at the Company’s registered office.

The key terms of the Non-Executive Directors’ letters of appointment are as follows:

DirectorDate of original letter

of appointment

Notice period from Director to the

Company Durationof term * Unexpired term

Total fees per annum

Richard Last 24 October 2013 6 months3 years from

Admission to Listing 33 months £90,000

Roger McDowell 24 October 2013 3 months3 years from


Bernie Waldron 30 October 2013 3 months3 years from


* Unexpired term: The Non-Executive Directors all have contracts that provide that each will serve for an initial 3-year period from the date of Admission to Listing on 2 December 2013. Each will offer themselves for election at the Company’s first AGM on 29 April 2014 and their appointments will then be subject to the provisions of the Articles of Association that require them to offer themselves for re-election at intervals of no more than 3 years. The unexpired term is calculated with reference to the date of Admission to Listing.


Scenarios

Minimum

LTIP

Tota

l Rem

uner

atio

n (£

’000

)

Tota

l Rem

uner

atio

n (£

’000

)

Target Maximum

David Bellamy

Threshold Target Maximum Threshold Target Maximum Threshold Target Maximum Threshold Target Maximum

Andrew Croft Ian Gascoigne David Lamb

0

100

200

300

400

500

600

700

800

900

1,000

338 338

138

138

338

275

275

Minimum Target Maximum0

50

100

150

200

250

300

350

400

450

500

160 160

70

70

160

140

140

Annual Bonus

Alan Stubbs – Chief Executive Officer Mike Cane – Chief Financial Officer

Fixed LTIPAnnual BonusFixed

Assumptions

Fixed • Consists of base salary, benefits and pension contributions.• Base salary is that to be paid in 2014.• Benefits measured as benefits figure in the single figure table.• The pension is measured as the amount of the employer’s contribution.

On-Target Based on what the Executive Director would receive if performance was in line with target (excluding share price appreciation and dividends):• Annual Bonus assumes annual targets set by the Remuneration Committee are met, which would pay out 50% of bonus maximum• LTIP: consists of the performance level at which 50% of the maximum face value vests.

Maximum Based on the maximum remuneration receivable (excluding share price appreciation and dividends):• Annual Bonus: consists of the maximum bonus (100% of base salary).• LTIP: assumes maximum vesting of awards based on the intended normal LTIP grant of 100% of salary.

Note: These scenarios assume an annual maximum LTIP grant of 100% of salary, which is the policy of the Remuneration Committee. At Listing in December 2013, awards with performance conditions were made equating to a maximum of 200% of salary for the CEO and 150% of salary for the CFO. As a result, the Remuneration Committee does not intend to grant any LTIPs to the Executive directors in 2014. As stated in the Prospectus the Remuneration Committee does have the ability to grant LTIPs at up to 200% of salary (rising to 300% for exceptional circumstances), but as stated above, in normal circumstances it would only expect to make annual grants at a maximum face value of 100% of salary.



eportG


ents

ANNUAL REPORT ON REMUNERATIONIntroductionThis Annual Report on Remuneration sets out information about the remuneration of the Directors and senior management of the Company for the year ended 31 December 2013. This report has been prepared in accordance with the provisions of the Companies Act 2006 and Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended) and 9.8.8R of the Listing Rules. An advisory resolution to approve this report will be put to shareholders at the forthcoming AGM. The information on pages 44 to 45 has been audited.

Remuneration Committee MembershipThe UK Corporate Governance Code, as it applies to the Company since Admission, provides that a Remuneration Committee should comprise at least 2 members who are independent Non-Executive Directors (other than the Chairman). Appointments to the Remuneration Committee are made by the Board on the recommendation of the Nomination Committee and are for a period of up to three years, which may be extended for further periods of up to 3 years, provided that the Director whose appointment is being considered still meets the criteria for membership. The Remuneration Committee consisted of the following Directors in the period from Admission to 31 December 2013:• Bernie Waldron (Chairman), Independent Non-Executive Director;• Roger McDowell, Senior Independent Non-Executive Director; and• Richard Last, Non-Executive Chairman.

Role of the Remuneration CommitteeThe Remuneration Committee assists the Board in determining its responsibilities in relation to remuneration, including making recommendations to the Board on the Company’s policy on executive remuneration, including setting the over-arching principles, parameters and governance framework of the Group’s remuneration policy and determining the remuneration and benefits package of each of the Executive Directors and the Company Secretary and providing guidance on the remuneration of the senior management group. The Remuneration Committee also ensures compliance with the UK Corporate Governance Code in relation to remuneration wherever possible.

Terms of reference for the Remuneration Committee have been approved by the Board and are available on the corporate governance page on the Company’s website, www.servelec-group.com.

Activities of the Remuneration Committee in 2013In the run up to the IPO and after the Listing the Committee met 3 times to make awards under the Servelec share schemes, adopted by the Board on 24 October 2013 following shareholder approval, and to consider a proposal to increase the Finance Director’s salary with effect from 1 January 2014.

Advisers Prior to Listing, the Company received independent advice from h2glenfern Remuneration Advisory (a division of h2glenfern Limited) on a number of remuneration issues including helping the Board develop its remuneration policy. h2glenfern Limited also provides communication services to the Company. h2glenfern Remuneration Advisory operates independently within h2glenfern and operates in accordance with the principles of the Code of Conduct of the Remuneration Consultants’ Group in relation to executive remuneration consulting in the United Kingdom. The fees for this remuneration advice excluding VAT were £18,700.

The Company Secretary ensures that the Remuneration Committee fulfils its duties under its terms of reference and provides regular updates to the Remuneration Committee on relevant regulatory developments in the UK.


The following information has been subject to audit:

Single total figure of remunerationDirectors’ remuneration is made up of payments from the UK and payments from Singapore. The UK payments have been accounted for in Servelec Group plc and the payments from Singapore accounted for in CSE Global Ltd (the previous parent company).

The detailed emoluments received by the Executive and Non-Executive Directors for the year ended 31 December 2013 are detailed below:

Director Paid By(5) Salary/Fees Taxable Benefits Share Reward(6)

Annual Performance Related Bonus Pension Total

Richard Last(1) UK 44,583 (35,000) – – Nil (25,000) 44,583 (60,000)Singapore 24,000 (24,000) – – 100,000 (Nil) 124,000 (24,000)

Total 68,583 (59,000) – – 100,000 (25,000) 168,583 (84,000)

Roger McDowell UK 8,952 (Nil) – – – 8,952 (Nil)

Bernie Waldron UK 7,027 (Nil) – – – 7,027 (Nil)

Lim Ming Seong(2) Resigned 1 Sep 13 Singapore 24,000 (36,000 ) – – – 24,000 (36,000)

Total Non Exec UK 60,562 (35,000) – – Nil (25,000) 60,562 (60,000)Singapore 48,000 (60,000) – – 100,000 (Nil) 148,000 (60,000)

Total 108,562 (95,000) – – 100,000 (25,000) 208,562 (120,000)

Director Paid By(5)

Salary/Fees (£)

Taxable Benefits(£)

Share Reward(6)

(£)

Annual Performance Related Bonus (7)

(£)Pension

(£)Total

(£)

Alan Stubbs(3) UK 87,221 (70 150) 20,973 (18,113) – – 49,271 (50,000) 157,465 (138,263)Singapore 179,758 (167 ,350) – 3,000,000 (Nil) Nil (450,000) – 3,179,758 (617,350)

Total 266,979 (237,500) 20,973 (18,113) 3,000,000 (Nil) Nil (450,000) 49,271 (50,000) 3,337,223 (755,613)

Mike Cane(4) UK 82,500 (Nil) 20,973 (Nil) – – 2,475 (Nil) 91,093 (Nil)

Singapore – – 265,994 (Nil) – – 265,994 (Nil)Total 82,500 (Nil) 20,973 (Nil) 265,994 (Nil) – 2,475 (Nil) 357,087 (Nil)

John Caldwell Resigned 31 Oct 12 UK Nil (108,333) Nil (2,073) – – Nil (35,708) Nil (146,114)

Total Exec UK 169,721 (178,483) 27,091 (20,186) – – 51,746 (85,708) 248,558 (284,377)Singapore 179,758 (167,350) – 3,265,994 (Nil) Nil (450,000) – 3,445,752 (617,350)

Total 349,479 (345,833) 27,091 (20,186) 3,265,994 (Nil) Nil (450,000) 51,746 (85,708) 3,694,310 (901,727)

Total Directors UK 230,283 (213,483) 27,091 (20,186) – – 51,746 (85,708) 309,120 (344,377)Singapore 179,758 (24,000) – 3,265,994 (Nil) 100,000 (450,000) – 3,593,752 (24,000)

Total 458,041 (237,483) 27,091 (20,186) 3,265,994 (Nil) 100,000 (450,000) 51,746 (85,708) 3,902,872 (368,377)

(1) Richard Last was also a Director of CSE Global Ltd. It is not practical to apportion his remuneration between the services as Directors of the Company and their services as Directors of the holding and fellow subsidiary companies.

(2) Lim Ming Seong was also a Director of CSE Global Ltd and other CSE Group undertakings. It is not practical to apportion his remuneration between the services as Directors of the Company and their services as Directors of the holding and fellow subsidiary companies.

(3) Alan Stubbs was also the Chief Executive Officer of CSE Global Ltd and a Director of other CSE Group undertakings. It is not practical to apportion his remuneration between the services as Directors of the Company and their services as Directors of the holding and fellow subsidiary companies.

(4) Mike Cane is also a Director of MGC Accounting Solutions Ltd, who indirectly received income for consultancy services of £43,400 (2012: £41,300). The consultancy services related to work done by Mike Cane when he was not a Director of Servelec Group Plc and so is not included in the numbers above.

(5) The remuneration paid via Singapore was not recharged to Servelec Group Plc.(6) The share reward was a reward, conditional upon admission to the London Stock Exchange, to key individuals involved in the IPO process. The cash value disclosed is equivalent to the shares issued

and the cash paid to cover tax and national insurance for the individual.(7) Alan Stubbs’ Singapore bonus for 2013 has been assumed as nil, as at the time of this report, CSE Global Ltd had not given an indication of any payments to be made. If a subsequent payment is

made it will not be recharged to Servelec Group plc

Long-term incentive planFollowing Listing, the Remuneration Committee granted performance and service-related conditional share awards to the Executive Directors under the LTIP details of which are summarised below:

Name/Plan year Date of grantMaximum number of shares awarded Value of initial LTIP award (£)

Alan Stubbs2013 29 November 2013 307,263 550,000

Mike Cane2013 29 November 2013 92,179 165,000

Vesting will occur following the end of the 2016 financial year on the date the Remuneration Committee determines the extent to which the performance condition has been satisfied.



eportG


ents

The LTIP awards are subject to the following performance conditions. The vesting of 50% of an award will be subject to a condition that measures growth in earnings per share (‘EPS’) of the Company above inflation over a 3 year performance period (using the financial year ending 31 December 2013 as the base year) as follows:

EPS growth above RPI over three-year period Percentage of shares subject to the condition that will vest

Less than 8% per annum above RPI Nil

8% per annum above RPI 30%


Between 8% per annum and 12% per annum above RPI Between 30% and 100% on a straight-line basis

The vesting of the remaining 50% of an award will be subject to a condition that measures the Company’s Total Shareholder Return (‘TSR’) over a period from Admission until the date when the Remuneration Committee determines the extent to which the EPS growth performance condition has been satisfied as follows:

TSR growth from Admission to EPS growth determination date Percentage of shares subject to the condition that will vest

Less than 8% per annum above RPI Nil



Between 8% per annum and 15% per annum above RPI Between 30% and 100% on a straight-line basis

Although it was anticipated in the Admission Prospectus that the EPS growth above RPI threshold target would be 3% the Remuneration Committee felt that this target was not suitably challenging. A more demanding threshold target of 8% EPS growth over RPI was attached to these awards. The TSR threshold target of 8% as anticipated in the Admission Prospectus was considered suitably challenging.

The Remuneration Committee may reduce the number of shares to which the LTIP awards relate if the financial results used to determine the number of shares to which any award relates or to measure the satisfaction of a performance condition have been misstated or facts or assumptions used for those purposes are discovered to be incorrect or if the Remuneration Committee determines that other exceptional circumstances exist, for example, a participant’s material misconduct.

LTIP awards will normally vest on the latter of:• The date the Remuneration Committee determines whether any performance condition and/or any other condition has been satisfied (and then

only to the extent that the performance condition and/or any other condition has been satisfied; and• The third anniversary of the grant date. Save As You Earn Option Plan

Director Award DateAwards held

at 02/12/13

Granted during the

period

Exercised/lapse in the

period

ExercisePrice

(£)Awards held

at 31/12/13

Mike Cane 02/12/13 5,027 5,027 Nil 1.79 5,027

Directors’ share interestsThe number of Ordinary Shares of the Company in which the Directors were beneficially interested immediately following Admission on 2 December 2013 and at 31 December 2013 was:

Director2 December 2013(Admission Date) 31 December 2013

Richard Last 418,994 418,994Roger McDowell 139,665 139,665Bernie Waldron 27,933 27,933Alan Stubbs 838,600 838,600Mike Cane 74,300 74,300

Share ownership guidelinesThe Remuneration Committee has considered whether a share ownership guideline should be set for Executive Directors and has determined that no such guideline should be set. Lock-up agreements are however in place such that the Directors have agreed that during a period of 12 months from Admission he shall not, directly or indirectly, sell, transfer or otherwise dispose of (or contract to do so) any shares or create any option or charge which could lead to any such sale, transfer or disposal.


The following information has not been subject to audit:Percentage change in the remuneration of the Chief Executive OfficerThe table below demonstrates the percentage of change in base salary, value of taxable benefits and bonus for the CEO compared to all employees of the Group.

CEO remuneration

2013£

2012£

2013% increase

Employee remuneration 2013% increase

Salary and fees 266,979 237,500 12.4% 3%Taxable benefits 20,973 18,113 15.8% n/aAnnual bonus Nil 450,000 (100)% 39%Other bonuses 3,000,000 Nil n/a n/aPension 49,271 50,000 (1.5)% n/aTotal 3,337,223 755,613 – n/aSingle total figure of remuneration 3,337,223 755,613 – –

Notes:(1) CEO remuneration is from the single total figure of remuneration table on page 44(2) The CEO’s remuneration also reflects his role as CEO of the previous parent company, CSE Global Ltd, and the IPO bonus earned in 2013.(3) The % increase in average remuneration for employees is calculated using wages and salaries (excluding share-based payments, overtime and allowances) for those employees employed in 2012 and 2013.(4) The % increase in average performance related remuneration is based on the increase in bonus payments for employees of the group who were eligible for a bonus and employed for both periods.(5) Benefits across the Group remained the same, other than amendments in accordance with HM revenue & Customs guidelines. The average percentage change in taxable benefits does not produce a

meaningful comparison.(6) Pension rates have not changed across the period.

Relative importance of the spend on payThe chart below shows the Company’s total employee remuneration and dividends distributed for the year under review and the prior year as well as the year-on-year change.

Key highlights:• Total profit after tax was £8,910,000 (2012: £8,456,000) and total profit after tax from continuing operations was £8,925,000 (2012: £8,449,000 )• Staff costs for 2013 were £18,828,000 (2012: £17,191,000). The increase in salaries reflects the increase in staff numbers• The Company made a distribution to shareholders in 2013 of £6,500,000 prior to the IPO in December 2013. The Board is not recommending a

further dividend for the year ending 2013.

Payments to departing directorsDuring the year, the Company has not made any payments to past Directors; neither has it made any payments to directors for loss of office.

Comparison of Company performance and CEO remuneration over 5 year periodThe following graph shows the total remuneration figure for the Chief Executive role for the last 5 years. The current CEO, Alan Stubbs, was also appointed to Chief Executive Officer of CSE Global Ltd (the previous parent company) in January 2011 and the table includes remuneration for both roles. The Company has only been listed on the London Stock Exchange since December 2013.

Year ended 31 December (£’000)

CEO remuneration Paid by 2009 2010 2011 2012 2013

Salary and benefits UK 405 222 177 138 157Singapore – 34 133 167 180

Annual bonus UK 450 – – – –Singapore – 600 300 450 3,000

Total remuneration 855 856 610 755 3,337


2012

Tota

l Rem

uner

atio

n (£

’000

)

20130

5,000

10,000

15,000

20,000

Dividends

Employee Remuneration and Dividends

Employee Remuneration

17,191

2,000

18,828

6,500

+10%

+225%


eportG


ents

The TSR for Servelec Group Plc has been rebased on 2 December 2013 at the opening price of £2.07 per share. The IPO price was £1.79.

Application of the policy for 2014The policy will apply to any remuneration made on or after 29 April 2014

SalaryThe salaries are effective from 1 January 2014 are:

£’000

Alan Stubbs 275Mike Cane 140

Benefits (excluding pension contributions)These will remain as life assurance, a company car, medical insurance and permanent health insurance.

PensionEmployer contributions to the Group Retirement Benefits Scheme money purchase pension arrangement will remain as stated in the policy.

Annual BonusThe Remuneration Committee has set stretching targets focused on both profit and cash performance for the Company. Although the target detail is considered commercially sensitive the measures and weightings for the year commencing 1 January 2014 are:

Operating Profit Operating cashflow Maximum

Alan Stubbs 66.66% 33.33% 100% salaryMike Cane 66.66% 33.33% 100% salary

Two-thirds of any bonus earned will be paid in Cash and one third in shares under the Deferred Share Bonus Plan.

LTIPHaving granted initial awards on Listing there will be no further grants of LTIP awards to the current Executive Directors in 2014.

Shareholder votingThe Company listed in December 2013. The forthcoming AGM to be held on 29 April 2014 will be the first AGM since listing and therefore the first time a remuneration report has been put to a shareholder vote.

ApprovalThis Directors’ Remuneration Report has been approved by the Board of Directors of Servelec Group plc.

Signed on behalf of the Board of Directors.

Bernie WaldronChairman, Remuneration Committee 12 March 2014

2

Tota

l Rem

uner

atio

n (£

’000

)

96

98

100

102

104

106

108

Historical Total Shareholder Return Performance

FTSE Small CapSERV

3 4 5 6 9 10 11 12 13 16 17 18 19 20 23 24 25 26 27 30 31

December ‘13


The Directors are pleased to present the first Annual Report and consolidated financial statements of Servelec Group plc for the year ended 31 December 2013.

The corporate governance report on pages 32 to 33 and the corporate social responsibility report (with regard to information about the employment of disabled persons, employee involvement and greenhouse gas emissions) are also incorporated into this report by reference.

The Company has chosen, in accordance with section 414C (11) of the Companies Act 2006 to include the disclosure of likely future developments in the strategic report (see pages 6 to 9.

Financial risk managementThe Company’s objectives and policies on financial risk management including information on the Company’s exposures to market risk, including foreign currency, commodity price, interest rate, inflation rate and equity price risks, credit risk and liquidity risk can be found in note 22 to the financial statements.

The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Strategic Review on pages 1 to 29. The financial position of the Group, its cash flows and liquidity position are described in the Financial Review on pages 52 to 93. In addition, note 22 to the financial statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

Results and dividendsResults for the year are set out in the Consolidated Income Statement on page 54.

The Directors are not recommending the payment of any final dividend in respect of the year ended 31 December 2013.

DirectorsThe names and biographies of the current Directors of the Company are set out on page 30 of this Annual Report.

Directors’ share interestsParticulars of the number of Ordinary Shares of the Company in which the Directors were beneficially interested immediately following Admission on 2 December 2013 and at 31 December 2013 are set out in the Directors’ Remuneration Report on page 45.

Directors’ indemnitiesThe articles permit the Board to grant the Directors indemnities in relation to their duties as Directors, including third party indemnity provisions (within the meaning of the Companies Act) in respect of any liabilities incurred by them in connection with any negligence, default, breach of duty or breach of trust in relation to the Company. No such indemnities have to date been granted.

Compensation for loss of officeThere are no agreements between the Company and its Directors or employees providing for compensation for loss of office or employment that occurs as a result of a takeover bid. Further details of the Directors’ service contracts can be found in the Directors’ Remuneration Report on pages 37 to 47.

Directors’ and Officers’ liability insuranceDirectors’ and Officers’ Liability Insurance cover is in place at the date of this report, having been purchased prior to the IPO. The Board remains satisfied that an appropriate level of cover is in place and a review of cover will take place on an annual basis.

Significant agreements: change of controlWe have five major contracts within the Servelec Group which contain clauses that give the corresponding customers the right to terminate in the event of a change of control subsequent to a takeover bid. Four of these contracts are with Servelec Healthcare and the remaining contract is with Servelec Systems. For three of these contracts the customer’s right of termination subsists for a period of no longer than 6 months (post-takeover) following which the right to terminate expires. In two of the contracts, the right to terminate is conditional upon the customer exercising its discretion on reasonable grounds. All of the customers pertaining to these contracts were fully apprised of the change of control as a result of the IPO and none of the customers have indicated any intention to invoke their rights under these clauses.

As disclosed in the Remuneration Report page 41, the Chief Executive Officers notice period extends from 12 months to 24 months following a change of control of the Company.

The Company does not have any agreements with any Non-Executive Director, Executive Director or employee that would provide compensation for loss of office or employment resulting from a change of control.

Articles of associationThe Articles of Association (adopted by special resolution on 18 October 2013) may only be amended by special resolution of the shareholders. A copy of the articles is available on request from the Company Secretary.

Share capital: structure, rights and restrictionsDetails of the Company’s share capital are set out in note 23 to the Financial Statements on page 75. The Company has a single class of share capital divided into Ordinary Shares of £0.18 each. The Ordinary Shares are listed on the London Stock Exchange. The rights and obligations attaching to these shares are governed by UK law and the Company’s Articles of Association.

DIRECTORS’ REPORT


eportG


ents

Voting rights attaching to sharesOrdinary shareholders are entitled to receive notice and to attend and speak at any general meeting of the Company. On a show of hands every shareholder present in person or by proxy (or being a corporation represented by a duly authorised representative) shall have one vote, and on a poll every shareholder who is present in person or by proxy shall have one vote for every share of which he is the holder. The Notice of Annual General Meeting specifies deadlines for exercising voting rights and appointing a proxy or proxies. Deadlines for exercising voting rights attaching to sharesThe Articles provide a deadline for the submission of proxy forms (whether by an instrument in writing or electronically) of not less than 48 hours before the time appointed for the holding of the meeting or the adjourned meeting.

Shares in uncertificated formDirectors may determine that shares may be held in uncertificated form and title to such shares may be transferred by means of a relevant system or that shares should be cease to be so held and transferred.

Variation of rights attaching to sharesThe articles provide that rights attached to any class of shares may be varied with the written consent of the holders of not less than three-quarters in nominal value of the issued shares, or with the sanction of a special resolution passed at a separate general meeting of the holders of those shares. At every such separate general meeting, the quorum shall be 2 persons holding or representing by proxy at least one-third in nominal value of the issued shares (calculated excluding any shares held in treasury). The rights conferred upon the holders of any shares shall not, unless otherwise expressly provided in the rights attaching to those shares, be deemed to be varied by the creation or issue of further shares ranking pari passu with them.

Restrictions on voting rights attaching to sharesThere are no restrictions on the transfer of the Ordinary Shares other than:• the standard restrictions for a UK-quoted company set out in article 17.5 of the Articles of Association; and• where, from time to time, certain restrictions may become imposed by laws and regulations (for example, insider trading laws); and • pursuant to the Listing Rules of the Financial Conduct Authority whereby certain Directors, officers and employees of the Company require the

approval of the Company to deal in the Ordinary Shares.

No shareholder holds securities carrying special rights as to the control of the Company. There are no limitations on the holding of securities. There are no restrictions on voting rights or any arrangements by which, with the Company’s co-operation, financial rights carried by securities are held by a person other than the holder of the securities. There are no agreements between holders of securities that are known to the Company which may result in restrictions on the transfer of voting rights.

Authority to purchase own shares By a resolution of the sole shareholder of the Company passed on 12 November 2013, the Directors were authorised to purchase up to 10% of its issued Ordinary Share capital as at the date of admission to listing. This authority will expire at the Annual General Meeting in 2014 at which a resolution to renew the authority for a further year will be proposed. No shares have been purchased by the Company since 12 November 2013.

As at 11 March 2014, being the latest practicable date prior to the publication of this report, the Company did not hold any shares in treasury.

Appointment and replacement of DirectorsUnless determined by ordinary resolution of the Company, the number of Directors shall not be less than 2 or more than 10 in number. A Director is not required to hold any shares in the Company by way of qualification.

The Board may appoint any person to be a Director and such Director shall hold office only until the next AGM, when he or she shall be eligible for appointment by the shareholders. The articles provide that at each AGM, one-third of the Directors for the time being (or, if their number is not a multiple of 3, then the number nearest to but not exceeding one-third) shall retire from office. A Director who retires at any AGM shall be eligible for re-appointment. In addition, any director appointed by the Board shall hold office only until the next following AGM and shall then be eligible for appointment.

Power of DirectorsSubject to the Articles, the Companies Act and any directions given by special resolution, the business of the Company shall be managed by the Board who may exercise all the powers of the Company to, for example, borrow money; mortgage or charge any of its undertaking, property and uncalled capital; and issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company.

Greenhouse Gas EmissionsThe Company’s disclosures on greenhouse gas emissions can be found in the CSR section of the Strategic Review on page 29 and form part of the Directors’ Report.

Employment PoliciesArrangements for consulting and involving Group employees on matters affecting their interests at work, and informing them of the performance of their employing business and the Group, are developed in ways appropriate to each business. A variety of approaches is adopted aimed at encouraging the involvement of employees in effective communication and consultation, and the contribution of productive ideas at all levels.

Employment policies are designed to provide equal opportunities irrespective of race, caste, national origin, religion, age, disability, gender, marital status, sexual orientation or political affiliation. Group policy is to ensure that disabled applicants for employment are given full and fair consideration having regard to their particular aptitudes and abilities, and that existing disabled employees are given equal access to training, career development and promotion opportunities. In the event of existing employees becoming disabled, all reasonable means would be explored to achieve retention in employment in the same or an alternative capacity, including arranging appropriate training. Further details in relation to the Group’s Employment policy is set out in the CSR section of the Strategic Report on page 28.


Political donationsThe Company has made no political donations since Admission on 2 December 2013 and intends to continue its policy of not doing so for the foreseeable future.

Major interests in sharesAs at 31 December 2013, the Company had been advised, in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority, of the following notifiable interests (whether directly or indirectly held) in 3% or more of its voting rights:

Notification received from Number of voting rights %

Schroders Investment Management 13,491,620 19.74Henderson Global Investors 10,958,100 16.04Old Mutual Asset Managers 4,628,491 6.77SFM UK Management LLP 3,910,614 5.72SVG Investment Management 3,631,284 5.31Jupiter Asset Management 2,807,262 4.11Investec Asset Management 2,610,335 3.82Standard Life Investments 2,600,558 3.80Blackrock Investment Management 2,346,368 3.43

Since the year end and up to the date of this report, there have been the following significant changes:

Notification received from Number of voting rights %

SFM UK Management LLP 3,460,614 4.99

Going concernAfter making enquiries, the Directors have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. In making this assessment they have considered the Company and Group budgets, and cash flow forecasts for the period to December 2014. The Company has considerable financial resources, negligible liquidity risk and is operating within a sector that is experiencing relatively stable demand for its products. The Directors therefore have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Thus they continue to adopt the going concern basis of accounting in preparing the annual financial statements.

Audit informationEach of the Directors at the date of the approval of this report confirms that:• so far as he is aware, there is no relevant audit information of which the Company’s auditors are unaware; and• he has taken all the reasonable steps that he ought to have taken as a Director to make himself aware of any relevant audit information and to

establish that the Company’s auditors are aware of the information.

The confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.

AuditorsThe Auditors, Ernst & Young LLP have indicated their willingness to continue in office and a resolution seeking to reappoint them will be proposed at the Annual General Meeting.

Annual general meetingThe Company’s Annual General Meeting will be held at techUK, 10 St Bride Street, London EC4A 4AD on 29 April 2014 at 09:30. Details of the meeting venue and the resolutions to be proposed are set out in a separate Notice of Meeting which accompanies the Annual Report. The Directors consider that all of the proposed resolutions are in the best interests of the Company and its shareholders as a whole. It is the Directors’ recommendation that you support the proposed resolutions and vote in favour of them, as each of the Directors intends to do.

The Directors’ Report has been approved by the Board of Directors of Servelec Group plc.

Signed on behalf of the Board.

Richard LastNon-Executive Chairman12 March 2014

Servelec Group plcRegistered Office:Rotherside RoadEckingtonSheffieldSouth Yorkshire S21 4HL

Company No: 03098411

DIRECTORS’ REPORTCONTINUED


eportG


ents

STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RELATION TO THE GROUP FINANCIAL STATEMENTSThe Directors are responsible for preparing the Annual Report and the Group Financial Statements in accordance with applicable United Kingdom law and those International Financial Reporting Standards (IFRS) as adopted by the European Union.

Under Company Law the Directors must not approve the Group Financial Statements unless they are satisfied that they present fairly the financial position of the Group and the financial performance and cash flows of the Group for that period. In preparing the Group Financial Statements, the Directors are required to:

• select suitable accounting policies in accordance with IAS 8 ‘Accounting Policies, Change in Accounting Estimates and Errors’ and then apply them consistently;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;• provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of

particular transactions, other events and conditions on the Group’s financial position and financial performance;• state that the Group has complied with IFRSs, subject to any material departures disclosed and explained in the Financial Statements; and• make judgements and accounting estimates that are reasonable and prudent.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that the Financial Statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are also responsible for preparing the Strategic Report, Directors‘ Report, the Directors‘ Remuneration Report, the Audit Committee Report and the Corporate Governance Statement in accordance with the Companies Act 2006 and applicable regulations, including the requirements of the Listing Rules and the Disclosure and Transparency Rules.

Directors’ Responsibility StatementEach of the Directors listed on page 30, confirms that to the best of their knowledge:

• the Financial Statements, prepared in accordance with IFRS as adopted by the European Union, give a true and fair review of the assets, liabilities, financial position and results of Servelec and its subsidiaries included in the consolidation taken as a whole;

• the Strategic Report (including the business model, the strategy, the business reviews, the divisional reviews, the risk management report and corporate Social Responsibility report) and the Directors’ Report (including the Corporate Governance Reports) include a fair review of the development and performance of the business and the position of Servelec and its subsidiaries included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face;

• the Report (including the Financial Statements), taken as a whole, is fair, balanced and understandable and provides the information necessary for Shareholders to assess and provide Servelec’s performance, business model and strategy.

Signed on behalf of the Board

AR Stubbs MG CaneChief Operating Officer Chief Financial Officer


INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF SERVELEC GROUP PLC

We have audited the group financial statements of Servelec Group plc for the year ended 31 December 2013 which comprise the Group income statement, the Group statement of comprehensive income, the Group statement of financial position, the Group statement of changes in equity, the Group cash flow statement and the related notes 1 to 29. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the European Union.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorAs explained more fully in the Directors’ Responsibilities Statement set out on page 51, the directors are responsible for the preparation of the group financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the group financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the group’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report and Accounts to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on the financial statementsIn our opinion the group financial statements:• give a true and fair view of the state of the Group’s affairs as at

31 December 2013 and of its profit for the year then ended;• have been properly prepared in accordance with IFRSs as adopted by

the European Union; and• have been prepared in accordance with the requirements of the

Companies Act 2006 and Article 4 of the IAS Regulation.

Our assessment of risks of material misstatementWe consider that the following areas present the greatest risk of material misstatement in the financial statements and consequently have had the greatest impact on our audit strategy, the allocation of resources and, the efforts of the engagement team, including the more senior members of the team:• Revenue recognition, in particular long-term contract accounting;

and• Accounting for the purchase of the Semaphore businesses, in

particular the recognition and valuation of goodwill and intangibles acquired

Our application of materialityWe apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements on our audit and on the financial statements. For the purposes of determining whether the financial statements are free from material misstatement we define materiality as the magnitude of misstatement that makes it probable that the economic decisions of a reasonably knowledgeable person, relying on the financial statements, would be changed or influenced.

When establishing our overall audit strategy, we determined a magnitude of uncorrected misstatements that we judged would be material for the financial statements as a whole. We determined materiality for the Group to be £520,000, which is approximately 5% of profit before tax.

On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement is that overall performance materiality for the Group should be 75% of planning materiality, namely £390,000. Our objective in adopting this approach is to ensure that total uncorrected and undetected audit differences do not exceed our materiality of £520,000 for the financial statements as a whole.

We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £26,000. We also agreed to report differences below that threshold that, in our view, warranted reporting on qualitative grounds.

An overview of the scope of our auditThe Group operates through 10 trading subsidiary undertakings (including the company itself and excluding CSE-Controls, s.r.o. which was sold in December 2013). Following our assessment of the risk of material misstatement to the Group financial statements, we selected 6 components which represent the principal business units within the Group’s 2 reportable segments and provide an appropriate basis for undertaking audit work to address the risks of material misstatement identified above. Four of these components were subject to a full audit, performed by the Group audit team. The other 2 components were subject to a partial audit where the extent of audit work was based on our assessment of the risks of material misstatement and of the materiality of the Group’s business operations at those locations. The components subject to a full and partial audit accounted for 89% of the Group’s revenue and 95% of the Group’s profit before tax.

Our response to the risks identified above was as follows:• Revenue recognition, in particular long-term contract accounting –

We performed audit procedures on the controls in place to ensure the appropriate determination of the percentage completion of each significant contract. We challenged management in respect of the reasonableness of judgments made regarding the cost to complete estimate and the adequacy of contingency provisions to mitigate contract specific risks. We also ensured that management’s policies and processes for making these estimates continue to be robust and are applied consistently to all contracts. We challenged and applied professional scepticism to judgments and accounting treatments made by management arising from contractual disputes and other risks. We performed audit procedures on supporting calculations and assumptions to ensure that these are materially accurate and in line with the Group’s accounting policies as well as the requirements of IFRS.

• Accounting for the purchase of the Semaphore businesses, in particular the recognition and valuation of goodwill and intangibles acquired – With the support of our valuation expert, we agreed the inputs, and challenged and applied professional scepticism to management’s assumptions and methodologies applied in the model to calculate the value of intangibles and goodwill acquired, including the cash flow projections, discount rates and amortisation period.


eportG


ents

Opinion on other matters prescribed by the Companies Act 2006In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the group financial statements are prepared is consistent with the group financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following:

Under the ISAs (UK and Ireland), we are required to report to you if, in our opinion, information in the annual report is:• materially inconsistent with the information in the audited financial

statements; or• apparently materially incorrect based on, or materially inconsistent

with, our knowledge of the Group acquired in the course of performing our audit; or

• is otherwise misleading.

In particular, we are required to consider whether we have identified any inconsistencies between our knowledge acquired during the audit and the Directors’ statement that they consider the annual report is fair, balanced and understandable and whether the annual report appropriately discloses those matters that we communicated to the audit committee which we consider should have been disclosed.

Under the Companies Act 2006 we are required to report to you if, in our opinion:• certain disclosures of Directors’ remuneration specified by law are

not made; or• we have not received all the information and explanations we require

for our audit.

Under the Listing Rules we are required to review:• the Directors’ statement, set out on page 50, in relation to going

concern; and• the part of the Corporate Governance Statement relating to the

Company’s compliance with the nine provisions of the UK Corporate Governance Code specified for our review.

Other mattersWe have reported separately on the Parent Company financial statements of Servelec Group plc for the year ended 31 December 2013 and on the information in the Directors’ Remuneration Report that is described as having been audited.

Stuart Watson(Senior Statutory Auditor)for and on behalf of Ernst & Young LLP Statutory Auditor Leeds12 March 2014


GROUP STATEMENT OF COMPREHENSIVE INCOME

GROUP INCOME STATEMENTFOR THE YEAR ENDED 31 DECEMBER

2013£’000

2012£’000

Profit for the financial period 8,910 8,456

Other comprehensive income to be reclassified through the income statementExchange differences on translation of foreign operations 138 (21)Exchange differences reclassified to income statement on sale of subsidiary 23 –

Total comprehensive income for the financial period, net of tax 9,071 8,435

Note2013

£’0002012

£’000

Revenue 3,4 41,995 39,361Cost of sales (23,582) (22,400)

Gross profit 18,413 16,961Selling and distribution expenses (2,005) (1,192)Administration and other expenses before amortisation (5,172) (4,769)

EBITA 11,236 11,000Amortisation (384) (163)

Operating profit from continuing operations 6 10,852 10,837Finance costs 10 (4) –Finance income 9 60 48

Profit before taxation from continuing operations 10,908 10,885Income tax expense 11 (1,983) (2,436)

Profit for the financial period from continuing operations 8,925 8,449

Discontinued operationsProfit after tax for the year from discontinued operations 26 (15) 7

Profit for the financial period 8,910 8,456

Earnings per share: 7Basic and diluted earnings per share for continuing operations 26p 33pBasic and diluted earnings per share for discontinuing operations nil nil


eportG


ents

GROUP STATEMENT OF FINANCIAL POSITION

Note31 Dec 2013

£’00031 Dec 2012

£’0001 Jan 2012

£’000

ASSETSNon-current assetsProperty, plant and equipment 12 1,480 1,188 1,102Intangible assets 13 21,098 12,829 12,874Deferred tax asset 11 18 221 111

Total non-current assets 22,596 14,238 14,087

Current assetsInventories 15 1,084 86 91Trade and other receivables 16 28,301 20,240 17,759Interest-bearing loan – – 1,500Cash and cash equivalents 18 7,538 8,549 3,570

Total current assets 36,923 28,875 22,920

TOTAL ASSETS 59,519 43,113 37,007

EQUITY AND LIABILITIESCurrent LiabilitiesTrade and other payables 19 11,086 7,087 7,425Current corporation tax 2,137 1,095 1,027

Total current liabilities 13,223 8,182 8,452

Non-current liabilitiesProvisions 20 520 150 140Deferred tax liabilities 11 749 341 410

Total non-current liabilities 1,269 491 550

TOTAL LIABILITIES 14,492 8,673 9,002

Equity shareholders’ fundsShare capital 23 12,300 4,578 4,578Share premium 23 754 501 501Share-based payment reserve 24 41 – –Currency translation reserve 73 (88) (67)Retained earnings 31,859 29,449 22,993

Total equity shareholders’ funds 45,027 34,440 28,005

TOTAL EQUITY AND LIABILITIES 59,519 43,113 37,007

Approved by the Board on 12 March and signed on its behalf by:

AR Stubbs MG CaneChief Executive Office Chief Financial Officer


GROUP STATEMENT OF CHANGES IN EQUITY

Note

Sharecapital

£’000

Sharepremium

£’000

Share-based payment

reserve£’000

Currency translation

reserve £’000

Retainedearnings

£’000Total

£’000

Balance as at 1 January 2012 4,578 501 – (67) 22,993 28,005

Profit for the period – – – – 8,456 8,456Other comprehensive income – – – (21) – (21)Dividends 8 – – – – (2,000) (2,000)

As at 31 December 2012 4,578 501 – (88) 29,449 34,440

Profit for the period – – – – 8,910 8,910Other comprehensive income – – – 161 – 161Share-based payments 24 – – 41 – – 41Issue of shares 23 7,722 253 – – – 7,975Dividends 8 – – – – (6,500) (6,500)

Balance as at 31 December 2013 12,300 754 41 73 31,859 45,027


eportG


ents

CASH FLOW STATEMENTFOR THE YEAR ENDED 31 DECEMBER

Note2013

£’0002012

£’000

Profit before taxContinuing operations 10,908 10,885Discontinued operations 26 62 7Operating activities

Profit before tax 10,970 10,892Adjustments to reconcile profit before tax to net cash flows: Depreciation and impairment of property, plant and equipment 12 244 181 Share based payment expenses 41 Amortisation and impairment of intangible assets 13 384 163 Loss on disposal of property, plant and equipment – 8 Loss on disposal of subsidiary 26 274 – Finance income 9 (60) (48) Finance costs 10 4 –Working capital adjustments (Increase) in trade and other receivables and prepayments (5,039) (2,481) (Increase)/decrease in inventories (69) 5 Increase/(decrease) in trade and other payables 2,315 (328)

Cash flows from operating activities 9,064 8,392

Interest received 60 48Interest paid (4) –Income tax paid (2,541) (2,547)

Net cash flows from operating activities 6,579 5,893

Investing activitiesPurchase of property, plant and equipment and intangibles (1,106) (384)Costs incurred on sale of subsidiary 26 (204)Acquisition of subsidiary undertaking net of cash acquired 27 184 –

Net cash flows from investing activities (1,126) (384)

Financing activitiesLoan payments received from related party – 1,500Dividends paid (6,500) (2,000)Proceeds from the issue of shares 281 –

Net cash flows from financing activities (6,219) (500)

Net increase in cash and cash equivalents (766) 5,009

Net foreign exchange difference (245) (30)

Cash and cash equivalents at start of period 8,549 3,570

Cash and cash equivalents at end of period 7,538 8,549


NOTES TO THE FINANCIAL STATEMENTS

1. General informationThe principal activities of Servelec Group plc (“Company”) and its subsidiaries (together “the Group”) are the design, manufacture, installation and commissioning of patient record systems, process automation systems, wide area Telemetry systems including pipeline control systems, management information systems and the development, manufacture and sale of electronic and microprocessor monitoring equipment.

Servelec Group plc is a public limited company incorporated and domiciled in the United Kingdom with company number 3098411. The registered office is located at Rotherside Road, Sheffield, S21 4HL. The Company wholly owns the subsidiaries listed in note 25, which together form Servelec Group plc (“the Group”). The historical financial information presented in the financial statements is at and for the years ended 31 December 2012 and 31 December 2013 and comprises a consolidation of the financial information of Servelec Group plc and all of its subsidiaries.

2. Summary of significant accounting policiesThe basis of preparation and accounting policies used in preparing the group financial information for the years ended 31 December 2012 and 2013 are set out below. These accounting policies have been consistently applied in all material respects to all the periods presented. The financial statements are presented in sterling (£’000).

This is the first time the Group has adopted IFRS and the transition is explained in note 28.

Basis of preparationThe consolidated historical financial information has been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted for use in the European Union. The financial information has been prepared based on those standards and using the principal accounting policies outlined below.

The historical financial information has been prepared on a historical cost basis.

The historical financial information has been presented in sterling, rounded to the nearest thousand (£’000) unless otherwise stated and has been prepared on a going concern basis.

The statement of financial position has been categorised into current and non-current items in accordance with IAS 1 ‘Presentation of Financial Statements’. To aid clarity, a number of items have been summarised both in the balance sheet and in the income statement. These are discussed in detail in the notes to the financial statements.

New standards and interpretationsThe Group adopted IFRS during the year. The new IFRS, IAS or amendments issued by the IASB or interpretation issued by the IFRS Interpretations Committee effective in the year and adopted as part of the IFRS transition which have had a significant impact on the Group’s consolidated financial statements were as follows:

IFRS 13 Fair Value MeasurementIFRS 13 establishes a single source of guidance for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. The resulting calculations under IFRS 13 affected the principles that the Group uses to assess the fair value, but the assessment of fair value under IFRS 13 has not materially changed the fair values recognised or disclosed. IFRS 13 mainly impacts the disclosures of the Group. It requires specific disclosures about fair value measurements and disclosures of fair values, some of which replace existing disclosure requirements in other standards.

IAS 1 Presentation of Items of Other Comprehensive Income – Amendments to IAS 1The amendments to IAS 1 became effective July 2012. The amendments introduce a grouping of items presented in other comprehensive income (OCI). Items that will be reclassified (‘recycled’) to profit or loss at a future point in time (eg, net loss or gain on available-for-sale financial assets) have to be presented separately from items that will not be reclassified (eg, revaluation reserve). The amendment affected presentation only.

New standards and interpretations not applied The following new standards, new interpretations and amendments to standards and interpretations have been issued but are not effective for the financial year beginning January 2013 and have not been early adopted:

International Accounting Standards (IAS/IFRSs) Effective date

IFRS 9 Financial Instruments: Classification and Measurement

Amendment to IFRS 10 Consolidated Financial Statements, Joint Venture Arrangement and Disclosure of Interests in Other Entities and Investment Entities

1 January 2014

IFRS 11 Joint Arrangements

Amendment to IFRS 12 Disclosure of Interests in Other Entities – Investment Entities

1 January 2014

Amendments to IAS 32 Financial Instruments 1 January 2014


eportG


ents

The Directors do not anticipate that the adoption of the above standards and interpretations will have a material impact on the Group’s Financial Statements, other than additional disclosures, in the period of initial application.

IFRS issued but not yet effectiveThe group has applied all accounting standards and interpretations issued by the IASB and IFRIC except for the following standards and interpretations which were in issue but not yet effective:

IAS 32 Offsetting financial assets and financial liabilities – Amendments to IAS 32 effective for annual periods commencing on or after 1 January 2014.

IFRS 9 Financial instruments: Classification and measurement effective for annual periods commencing on or after 1 January 2015.*

The effective dates stated above are those given in the original IASB/IFRIC standards and interpretations.

As the Group prepares its financial information in accordance with IFRS as adopted by the European Union, the application of new standards and interpretations will be subject to their having been endorsed for use in the EU via the EU Endorsement mechanism. In the majority of cases this will result in an effective date consistent with that given in the original standard or interpretation but the need for endorsement restricts the Group’s discretion to early adopt standards.

The Directors do not anticipate that the adoption of the remaining standards and interpretations will have a material impact on the Group’s historical financial information in the period of initial application.

Going ConcernThe financial statements have been prepared on a going concern basis. In determining the appropriate basis of preparation of the financial statements, the Directors are required to consider whether the Group can continue in operational existence for the foreseeable future.

Further information in relation to the Group’s business activities, together with the factors likely to affect its future development, performance and position is set out in the Strategic Review section of this report on pages 1 to 29.

Note 22 to the financial statements includes the Group’s objectives, policies and processes for managing its capital, its financial risk management objectives and its exposure to foreign exchange, credit and interest rate risk. Further details of the Group’s cash balances are included in Note 18 of the financial statements.

The Directors have assessed the future funding requirements of the Group and the Company and compared them to the level of cash in the business. The assessment included a detailed review of financial and cash flow forecasts for at least the 12 month period from the date of signing the Annual Report. The Directors considered a range of potential scenarios within the key markets the Group serves and how these might impact on the Group’s cash flow. The Directors also considered what mitigating actions the Group could take to limit any adverse consequences. The Group’s forecasts and projections show that the Group should be able to operate without the need for any borrowing facilities.

Having undertaken this work, the Directors are of the opinion that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the Annual Report and accounts.

ConsolidationThe financial information comprises a consolidation of the financial information of Servelec Group plc and all its subsidiaries. The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting policies.

Subsidiaries are all entities over which the Group has control. The Group controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Thus, the group controls an investee if and only if the Group has all of the following: power over the investee; exposure, or rights, to variable returns from its involvement with the investee; and the ability to use its power over the investee to affect the amount of the investor’s returns. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date that control ceases.

Inter-company transactions, balances and unrealised gains and losses resulting from intra-group transactions and dividends are eliminated in full.

Segment informationOperating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segment has been identified as the main board of Directors.

RevenueRevenue is recognised to the extent that it is probable that the economic benefits will flow to the group and the revenue can be reliably measured, regardless of when payment is being made. Revenue is measured at the fair value of the consideration received or receivable, taking into account contractually defined terms of payment and excluding taxes or duty.

* Not yet EU endorsed.


NOTES TO THE FINANCIAL STATEMENTSCONTINUED

2. Summary of significant accounting policies continuedRevenue continuedRendering of servicesRevenue from the rendering of services is recognised with reference to the stage of completion. Stage of completion is measured by reference to costs incurred to date as a percentage of total estimated costs. Revenue on short term projects is recognised once the service has been fully delivered to the client.

Sale of goodsRevenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer, usually on delivery of the goods.

Long-term contractsIn the case of long-term contracts, revenue reflects the value of contract activity during the year in proportion to the costs incurred to date. Long-term contracts are valued at cost plus attributable profit less foreseeable losses. Attributable profit is included when the outcome of a contract can be assessed with reasonable certainty. The value of long-term contracts is accounted for within revenue and the excess of this value over payments received on account is included in receivables. Payments received on account in excess of this value are included in payables.

Licence incomeLicences charged to customers for the use of proprietary software are assessed on a contract by contract basis and depending on the terms are either taken on delivery or spread on a usage basis over the term of the contract.

Interest incomeFor all financial instruments measured at amortised cost, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactly discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. Interest income is included in finance income in the income statement.

Foreign currencyFunctional and presentation currencyThe Group’s consolidated financial statements are presented in Sterling, which is also the parent company’s functional currency. For each entity the Group determines the functional currency and items included in the financial statements of each entity are measured using that functional currency.

The functional currency is the currency of the primary economic environment in which the company operates.

Transactions and balancesTransactions in foreign currencies are initially recorded in the functional currency by applying the spot exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the balance sheet date. All differences are taken to the income statement.

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

Group companiesThe assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation are translated into Sterling at the rate of exchange ruling at the balance sheet date. Income and expenses are translated at exchange rates ruling at the time of the transaction. The resulting exchange differences are taken directly to a separate component of equity.

Property, plant and equipmentProperty, plant and equipment is stated at cost less accumulated depreciation and accumulated impairment losses, if any. Such cost includes the cost of replacing part of the property, plant and equipment and borrowing costs for long-term construction projects if the recognition criteria are met.

Depreciation is calculated to write down the cost of the assets over the estimated useful lives on the following bases:• Plant, machinery, fixtures and fittings 10-25% per annum• Motor vehicles 25% per annum• Freehold property 2% per annum

The residual values, useful lives and methods of depreciation of property, plant and equipment are reviewed at the end of each reporting period and adjusted prospectively, if appropriate. The carrying values of property, plant and equipment are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.

An item of property, plant and equipment and any significant part is derecognised upon disposal or where no future economic benefits are expected to arise from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.


eportG


ents

Intangible assetsGoodwillGoodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in ‘intangible assets’. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

For the purposes of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash generating units (‘CGUs’) that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.

Computer software and licencesThird party software licences purchased and software recognised when acquired as part of a business combination are amortised in equal amounts over a period of 5 to 7 years, which is estimated to be their useful life.

Customer relationshipsIntangible assets classified as customer relationships are recognised when acquired as part of a business combination and are measured initially at fair value. Customer relationships are amortised evenly over their expected useful lives of 10 years.

Order backlogIntangible assets classified as order backlog are recognised when acquired as part of a business combination and are measured initially at fair value. Order backlogs are amortised evenly over their expected useful lives of between 1 and 6 years.

Research and development costsResearch costs are expensed as incurred. Development expenditures are capitalised and recognised as an intangible asset when the Group can demonstrate:• it is technically feasible to complete the intangible asset so that it will be available for use or sale;• its intention to complete the and use or sell the asset;• how the asset will generate probable future economic benefits;• adequate technical, financial and other resources to complete the development and to use or sell the asset; and• the ability to reliably measure the expenditure during development.

Costs that qualify for capitalisation include both internal and external costs, but are limited to those that are directly related to the specific project. Development costs are included at capitalised costs less accumulated amortisation and any recognised impairment loss.

Amortisation is calculated to write down the cost of the asset on a straight line basis over their estimated useful lives, which range from up to 5 years. Useful lives are reviewed at the end of each reporting period and adjusted if appropriate.

Impairment of non-financial assetsAssets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Where the asset does not generate cash flows that are independent from other assets, the Company estimates the recoverable amount of the cash-generating unit (CGU) to which the asset belongs. For tangibles and intangibles the allocation is made to those CGU units that are expected to benefit from the asset.

Any impairment charge is recognised in the income statement in the period in which it occurs. Where an impairment loss subsequently reverses due to a change in the original estimate, the carrying amount of the asset is increased to the revised estimate of its recoverable amount.

Financial instrumentsFinancial assetsThe Group classifies its financial assets as loans and receivables. Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting date. These are classified as non-current assets. The Company’s loans and receivables comprise ‘trade and other receivables’ and cash and cash equivalents in the statement of financial position. Subsequent to initial recognition, these assets are carried at amortised cost using the effective interest method.

Financial liabilitiesThe company initially recognises its financial liabilities at fair value and subsequently they are measured at amortised cost using the effective interest method.

Impairment of financial assetsAn assessment of whether there is objective evidence of impairment is carried out for all financial assets at the balance sheet date. This assessment may be of individual assets (‘individual impairment’) or of a portfolio of assets (‘collective impairment’). A financial asset is considered to be impaired if, and only if, there is objective evidence of impairment as a result of 1 or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset that can be reliably estimated.


2. Summary of significant accounting policies continuedImpairment of financial assets continuedFor individual impairment the principal loss event is 1 or more missed payments, although other loss events can also be taken into account, including arrangements in place to pay less than the contractual payments, fraud and bankruptcy or other financial difficulty indicators. An assessment of collective impairment will be made of financial assets with similar risk characteristics. For these assets, portfolio loss experience is used to provide objective evidence of impairment.

For financial assets carried at amortised cost, the charge to the income statement reflects the movement in the level of provisions made, together with amounts written off net of recoveries in the period.

Dividend distributionDividend distribution to the Company’s shareholders is recognised as a liability in the Company’s financial statements in the period in which the dividends are approved by the Board of Directors. Dividends are paid at the discretion of the Board of Directors.

Share based paymentsThe Group operates equity settled, share-based compensation plans. The fair value of the employee services received in exchange for the grant of the options is calculated using a Black-Scholes pricing model and is recognised as an expense over the vesting period. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options or performance shares granted. At each balance sheet date, the Group revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period. No expense is recognised for awards that do not ultimately vest except for awards where vesting is conditional upon market or non-vesting conditions which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied provided that all other performance or service conditions are satisfied.

PensionsThe Group operate a defined contribution scheme. Assets of the scheme are held separately from those of the company in independently administered funds. The amount charged against profits represents the contribution payable to the schemes in respect of the financial period.

LeasesThe determination of whether an arrangement is, or contains, a lease is based on the substance of the arrangement at its inception date. The arrangement is assessed for whether fulfilment of the arrangement is dependent upon the use of a specific asset or assets or the arrangement conveys the right to use the asset or assets, even if that right is not explicitly specified in an arrangement.

Operating leasesLeases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Operating lease payments are recognised as an operating expense in the income statement on a straight-line basis over the lease term.

InventoriesInventories are valued at the lower of cost and net realisable value.

Cash and cash equivalentsCash and cash equivalents in the statement of financial position comprise cash at bank, short-term deposits held at call with banks and other short-term highly liquid investments with original maturities of 3 months or less, and bank overdrafts. In the balance sheet, bank overdrafts are shown as borrowings in current liabilities.

Current taxationCurrent tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantially enacted by the balance sheet date.

Income tax relating to items recognised in comprehensive income or directly in equity is recognised in comprehensive income or equity and not in the income statement.

Deferred taxationDeferred income tax is provided using the liability method on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, with the following exceptions:• where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business

combination that at the time of the transaction affects neither accounting nor taxable profit or loss;• in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary

differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and• deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which deductible

temporary differences, carried forward tax credits or tax losses can be utilised.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.



eportG


ents

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.

Discontinued operationsThe Group classifies non-current assets and disposal groups as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use. Non-current assets and disposal groups classified as held for sale are measured at the lower of their carrying amount and fair value less costs to sell. The criteria for held for sale classification is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the income statement.

Property, plant and equipment and intangible assets are not depreciated or amortised once classified as held for sale.

Business combinations and goodwillBusiness combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. For each business combination, the Group elects whether to measure the non-controlling interest in the acquiree at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are expensed as incurred and included in administrative expenses.

Goodwill is initially measured at cost, being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests over the identifiable assets acquired and liabilities assumed. If the consideration transferred is less than the fair value of the net assets acquired, the gain is recognised directly in the income statement.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts by the acquiree.

If the business combination is achieved in stages, the previously held equity interest is remeasured at its acquisition date fair value and any resulting gain or loss is recognised in profit or loss.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration classified as an asset or liability that is a financial instrument and within the scope of IAS 39 Financial Instruments: Recognition and Measurement, is measured at fair value with changes in fair value recognised in profit or loss or as a change to other comprehensive income. If the contingent consideration is not within the scope of IAS 39, it is measured in accordance with the appropriate IFRS. Contingent consideration that is classified as equity is not remeasured and subsequent settlement is accounted for within equity.

The preparation of the financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods.

Estimates and assumptionsThe key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are described below. The Group based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances beyond the control of the Group. Such changes are reflected in the assumptions when they occur.

Contract costsAs set out in the revenue recognition accounting policy note, revenue from long-term contracts is recognised in proportion to the costs incurred to date. Costs to complete on contracts are based on management estimates and are reviewed on a monthly basis for appropriateness. Changes to estimates can result in variations in the percentage complete of a contract and therefore the amounts charged to the Group’s income statement.

Business combinationsAs set out in the business combinations and goodwill accounting policy note, intangible assets and goodwill is calculated based on management estimates of fair value calculated with reference to the information available at the time.


3. RevenueRevenue recognised in the income statement is analysed as follows:

2013£’000

2012£’000

Sale of goods 3,499 707Rendering of services 6,374 6,207Long-term contracts 32,122 32,447

41,995 39,361

No revenue was derived from exchanges of goods or services.

4. Segment informationFor management purposes, the Group is organised into business units according to the nature of the products and services, and has two reportable segments as follows:

• The Healthcare segment develops high quality, enterprise-wide systems for implementation across community, mental health, child health and hospital based services. The segment supplies software and IT solutions and services into the healthcare and social services markets.

• The Automation segment is engaged in the provision of complex, mission critical systems to the oil & gas, power, nuclear and water industries. The segment specialises in safety systems, protection systems, control systems and wide area telemetry control systems. The segment also offers business optimisation consultancy and remote telemetry units, which are designed and manufactured in house.

The Automation reporting segment is made up of two operating segments, Controls and Technologies, which have been aggregated as the Board consider that they have similar economic characteristics.

Management monitors the operating results of its business units separately for the purposes of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss, which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements. This measurement basis excludes the effect of central services, non-recurring expenditure and group financing costs which are not allocated to operating segments.

Transfer prices between operating segments are on an arm’s length basis in a manner similar to transactions with third parties.

The following tables present revenue and profit information for continuing operations regarding the Group’s business segments for the years ended 31 December 2013 and 31 December 2012. The discontinued operation would have been included in Automation, however, has been separately disclosed in note 26.

Year ended 31 December 2012

ServelecHealthcare

£’000

ServelecAutomation

£’000Central

£’000Total

£’000

Segment revenue 16,747 22,614 – 39,361Cost of sales (7,306) (14,929) – (22,235)Related party royalty charge (165) (165)

Gross profit 9,276 7,685 – 16,961Overheads (761) (3,002) (1,373) (5,136)Related party management charge – – (825) (825)Amortisation – – (163) (163)

Segment operating profit from continuing operations 8,515 4,683 (2,361) 10,837

Year ended 31 December 2013

ServelecHealthcare

£’000

ServelecAutomation

£’000Central

£’000Total

£’000

Segment revenue 14,879 27,116 – 41,995Cost of sales (6,498) (17,084) – (23,582)

Gross profit 8,381 10,032 – 18,413Overheads (821) (4,098) (1,467) (6,386)Related party management charge – – (750) (750)Share based payments – – (41) (41)Amortisation – – (384) (384)

Segment operating profit from continuing operations 7,560 5,934 (2,627) 10,852

Operating assets and liability information are measured on a Group basis and so have not been disclosed at segment level.

Adjustments and eliminationsSegment profit for each operating segment excludes net finance costs of £4,000 (2012: nil).



eportG


ents

Geographical information

Revenue from external customers2013

£’0002012

£’000

United Kingdom 36,658 33,839Europe 1,911 4,058Middle East 674 548Africa 984 687Far East 506 229Australasia 704 –North America 558 –

Total 41,995 39,361

Non-current assets for this purpose consist of property, plant and equipment and intangible assets and are all located in the United Kingdom.

Information about major customersRevenue from one customer amounted to £10,050,000 in the year ended 31 December 2013 (£13,967,000 in the year ended 31 December 2012) arising from sales reported in the Healthcare segment.

5. Staff costs2013

£’0002012

£’000

Wages and salaries 16,502 14,820Social security costs 1,827 1,760Pension costs for the defined contribution scheme 499 611

Total 18,828 17,191

The average monthly number of employees during the period was made up as follows:2013 2012

Production 370 335Marketing, sales and distribution 19 15Administration 47 47

Total 436 397

The year ended 31 December 2012 includes amounts from both continuing and discontinuing operations.

6. Group operating profit2013

£’0002012

£’000

This is stated after charging/(crediting)Research and development costs written off 2,013 2,596

Depreciation of property, plant and equipment – owned assets 244 176Depreciation of property, plant and equipment – leased assets – 5Amortisation of intangible assets (included within administration & other expenses) 384 163

Total depreciation and amortisation expense 628 344

Loss on disposal of property, plant and equipment – 8Fees payable to the Company’s auditor and its associates included in operating costs:– Ernst & Young – Audit of Group Financial Statements 35 10– Ernst & Young – Audit of Company Subsidiaries 65 39The Group’s Auditors also received fees of £450,000 for services on the IPO transaction, which were paid by CSE Global

Limited.Fees payable to the other auditors of the associates included in operating costs:- Foster Raffan 8 –- BDO 10 –Net loss on foreign currency translation (36) (7)Operating lease rentals payable 578 522Cost of inventories recognised as an expense (note 15) 141 296

The year ended 31 December 2012 includes amounts from both continuing and discontinued operations.


7. Earnings per shareBasic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the parent by the weighted average number of Ordinary Shares outstanding during the year.

The following reflects the income and share data used in the basic earnings per share computation:

2013£’000

2012£’000

Profit attributable to ordinary equity holders of the parent from continuing operations 8,925 8,449(Loss)/profit attributable to ordinary equity holders of the Parent from discontinued operations (15) 7

Net profit attributable to ordinary equity holders of the Parent 8,910 8,456

Thousands Thousands

Basic weighted average number of shares 34,113 25,436Dilutive potential Ordinary Shares 108 –Diluted weighted average number of shares 34,221 25,436

Basic and diluted earnings per share from continuing operations 26p 33pBasic and diluted earnings per share from discontinuing operations nil nil

The weighted average number of shares has been calculated assuming all shares were converted from £1 to 18p shares as from 1 January 2012 in line with IAS.33.27.

There have been no transactions involving ordinary shares between the reporting date and the date of completion of the historical financial information.

On 9 January 2014, a further 47,232 share options were granted to employees.

8. Dividends paid and proposed

Declared and paid during the year2013

£’0002012

£’000

Equity dividends on ordinary shares*: 6,500 2,000Dividend per share 19p 8p

Based on weighted average number of shares converted to 18p shares.

* Paid to former parent, CSE Global Limited.

9. Finance income2013

£’0002012

£’000

Bank interest 32 36Other interest 28 12

Total interest income for financial assets measured at amortised cost 60 48

10. Finance costs2013

£’0002012

£’000

Other interest (4) –

Total interest expense for financial liabilities measured at amortised cost (4) –



eportG


ents

11. Income tax expense(a) Tax charged in the income statement

2013£’000

2012£’000

Current income taxUK & foreign corporation tax 2,491 2,621Amounts overprovided in previous years (531) (6)Foreign tax in current year on discontinued operations (77) –

Total income tax on continuing operations 1,883 2,615

Deferred taxOrigination and reversal of temporary difference 116 (179)Impact of change in tax laws and rates (16) –

Total deferred tax 100 (179)

Tax expense in the income statement on continuing operations 1,983 2,436

(b) Tax relating to items charged or credited to other comprehensive income2013

£’0002012

£’000

Deferred taxExchange differences on retranslation of foreign operations – –Changes in tax laws and rates – –

Total deferred tax – –

Tax expense in the statement of other comprehensive income – –

(c) Reconciliation of income tax credit/chargeThe income tax expense in the income statement for the period differs from the standard rate of corporation tax in the UK of 23.25%, (2012: 24.5%). The differences are reconciled below:

2013£’000

2012£’000

Profit before taxation from continuing operations 10,908 10,885Profit on discontinued operations before taxation 336 7

11,244 10,892

Tax on profit on ordinary activities at 23.25% (2012: 24.5%) 2,614 2,669

Expenses not allowable for tax purposes 113 73Tax over provided in previous years (531) (6)R&D tax credits (120) (191)Utilisation of previously unrecognised tax losses – (27)Deferred tax rate difference (16) (82)

Total tax expense reported in the income statement 2,060 2,436

Less tax on discontinued operations (77) –

1,983 2,436

The standard rate of corporation tax in the United Kingdom for the year is 23.25% (2012: 24.5%). The Finance Act 2013 received Royal Assent on 17 July 2013 and enacted a reduction in the main rate of corporation tax to 21% with effect from 1 April 2014 and a further reduction of 1% will be applied to bring the main rate of corporation tax to 20% from 1 April 2015. Deferred tax has therefore been provided at 20%.


11. Income tax expense continued(d) Deferred taxDeferred tax included in the balance sheet is as follows:

31 Dec 2013£’000

31 Dec 2012£’000

1 Jan 2012£’000

Deferred tax liabilityIntangible Assets 631 231 286Accelerated capital allowances 118 110 124

749 341 410

Deferred tax asset

Other timing differences (18) (221) (111)

(e) Deferred tax in the income statement2013

£’0002012

£’000

Intangible assets 32 (56)Deferred tax liability on accelerated capital allowances 8 (13)Other timing difference 60 (110)

100 (179)

12. Property, plant and equipmentFreehold property

£’000

Motor vehicles

£’000

Plant, machinery, fixtures & fittings

£’000Total

£’000

At 1 January 2012 640 220 1,606 2,466Additions – – 265 265Disposals – (63) (3) (66)Foreign currency adjustment – (4) (5) (9)

At 31 December 2012 640 153 1,863 2,656

Acquisitions 1 8 307 316Additions – – 240 240Foreign currency adjustment (2) (1) (52) (55)

At 31 December 2013 639 160 2,358 3,157

Accumulated depreciation:At 1 January 2012 28 210 1,126 1,364Charge for the period 14 5 162 181Disposals – (55) (3) (58)Foreign currency adjustment – (8) (11) (19)

At 31 December 2012 42 152 1,274 1,468

Charge for the period 13 2 229 244Foreign currency adjustment (1) (1) (33) (35)

At 31 December 2013 54 153 1,470 1,677

Net book value

Freeholdproperty

£’000

Motorvehicles

£’000

Plant, machinery, fixtures & fittings

£’000Total

£’000

At 1 January 2012 612 10 480 1,102

At 31 December 2012 598 1 589 1,188

At 31 December 2013 585 7 888 1,480



eportG


ents

13. Intangible assets

Goodwill£’000

Licenses£’000

Computer software

£’000

Customer relationships

£’000

Orderbacklog

£’000Total

£’000

Cost:At 1 January 2012 11,982 154 – 1,396 298 13,830Additions 40 79 119Foreign currency adjustment – (2) – – – (2)

At 31 December 2012 11,982 192 79 1,396 298 13,947

Acquisitions 4,735 – 626 1,435 391 7,187Additions – 13 1,453 – – 1,466Disposals (318) (80) – – – (398)Foreign currency adjustment – 1 – – – 1

At 31 December 2013 16,399 126 2,158 2,831 689 22,203

Accumulated amortisation:At 1 January 2012 318 90 – 250 298 956Charge for the period – 15 5 143 – 163Foreign currency adjustment – (1) – – – (1)

At 31 December 2012 318 104 5 393 298 1,118

Charge for the period – 24 97 227 36 384Disposals (318) (80) – – – (398)Foreign currency adjustment – 1 – – – 1

At 31 December 2013 – 49 102 620 334 1,105

Net book valueGoodwill

£’000Licenses

£’000

Computer software

£’000

Customer relationships

£’000

Orderbacklog

£’000Total

£’000

At 1 January 2012 11,664 64 – 1,146 – 12,874

At 31 December 2012 11,664 88 74 1,003 – 12,829

At 31 December 2013 16,399 77 2,056 2,211 355 21,098

Customer relationships have a remaining amortisation period of 9 years (Dec-12: 7 years).Computer software has a remaining amortisation period of 5 years (Dec-12: 4 years).Order backlog has a remaining amortisation period of 9 years (Dec-12: Nil).Licences have a remaining amortisation period of 5 years (Dec-12: 5 years).

14. Impairment test for goodwillGoodwill acquired through business combinations has been allocated for annual impairment testing purposes to two cash-generating units, which are also operating and reportable segments, as follows:

31 Dec 2013£’000

31 Dec 2012£’000

1 Jan 2012£’000

Technologies 5,191 456 456Controls 11,208 11,208 11,208

16,399 11,664 11,664

The recoverable amount of a CGU is determined based on value-in use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by management covering a 3 year period extrapolated for a further 2 years assuming annual growth rates of 2% in perpetuity. The pre-tax cash flows for the 5 year period have been discounted back to the period end using weighted average costs of capital of 18.1%. This exercise has confirmed that there is no impairment. Cash flows beyond the 5 year period are extrapolated using the estimated growth rates stated in the key assumptions.


14. Impairment test for goodwill continuedKey assumptions used in value in use calculationsThe calculation of value in use for each of the CGUs is most sensitive to the following assumptions:• Discount rate 18.1%• Growth rate 2% from year 4 to perpetuity• Gross margins in line with current values

Discount rate – Discount rates represent the current market assessment of the risks specific to each CGU, taking into consideration the time value of money and individual risks of the underlying assets that have not been incorporated into the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Group and its operating segments and is derived from its weighted average cost of capital (WACC).

Management has applied the same assumptions, as noted above, to both CGU’s as they are of similar economic characteristics both belonging in the Automation reporting segment.

Sensitivity to changes in assumptionsWith regards to the assessment of value in use of the cash generating units, management believes that no reasonable possible change in any of the above key assumptions would cause the carrying amount of the unit to materially exceed its recoverable amount.

15. Inventories31 Dec 2013

£’00031 Dec 2012

£’0001 Jan 2012

£’000

Raw materials and consumables 302 56 62Work in progress 423 7 6Finished goods and goods for resale 359 23 23

Total inventories 1,084 86 91

During the year ended 31 December 2013 £141,000 (31 December 2012: £296,000) was recognised as an expense for inventories carried at net realisable value. This is recognised in cost of sales.

All inventories are carried at cost less a provision to take account of slow-moving and obsolete items. Changes in the provision for slow-moving and obsolete stock were as follows:

31 Dec 2013£’000

31 Dec 2012£’000

1 Jan 2012£’000

At beginning of period 295 339 372Acquisitions 492Charged to income 156 21 –Amount utilised (15) (65) (33)

At end of period 928 295 339

16. Trade and other receivables31 Dec 2013

£’00031 Dec 2012

£’0001 Jan 2012

£’000

Trade receivables 14,574 6,435 6,158Less: provision for impairment of receivables (505) (523) (489)

Trade receivables – net 14,069 5,912 5,669

Amounts due from customers for contract work 12,940 13,989 11,813

Prepayment and accrued income 474 250 229

Other debtors 818 89 48

Total trade and other receivables 28,301 20,240 17,759

Trade receivables are non-interest bearing and are generally on terms of 30 days.

At 31 December 2013, trade receivables of an initial value of £505,000 (31 December 2012: £523,000, on 31 December 2011: £489,000) were impaired and fully provided for.



eportG


ents

See below for the movements in the provision for impairment:

2013£’000

2012£’000

At 1 January 523 489Charged for period – 108Utilised (18) (74)

At 31 December 505 523

The ageing analysis of trade receivables was as follows:

31 Dec 2013£’000

31 Dec 2012£’000

1 Jan 2012£’000

Neither past due nor Impaired 5,374 5,249 5,065Past Due but not Impaired Less than 30 days 7,592 381 295

30-60 days 677 70 13260-90 days 81 154 57

Greater than 90 days 345 58 120

14,069 5,912 5,669

17. Contracts in progressTotal income and expense recognised under IAS 11 on contract in progress in the year:

2013£’000

2012£’000

Costs incurred for the period 20,789 19,793Recognised profits 17,707 18,861

Contract revenue for the period 38,496 38,654Recognised losses – –Costs incurred relating to future activity – –

38,496 38,654Less progress billing and advances (40,167) (36,903)Movement relating to discontinued operations – 139

(1,671) 1,890Brought forward 11,718 9,828

Carried forward 10,047 11,718

Aggregate amount of costs incurred and recognised profits (less losses) to date 38,496 38,654Retention asset 12,940 13,989Advances received (2,893) (2,271)

10,047 11,718

Retention assets are included in trade receivables. Advances are presented as part of Amounts due to customers for contract work.

18. Cash and cash equivalents31 Dec 2013

£’00031 Dec 2012

£’0001 Jan 2012

£’000

Cash at bank and in hand 2,118 2,849 1,570Cash on short-term deposits 5,420 5,700 2,000

Total cash and cash equivalents 7,538 8,549 3,570

Cash at bank earns interest at a floating rate based on daily bank deposit rates. Short-term deposits are made for varying periods, depending on the immediate cash requirements of the group, and earn interest at the respective short-term deposit rates.


19. Trade and other payables

31 Dec 2013£’000

31 Dec 2012 £’000

1 Jan 2012 £’000

Amounts due to customers for contract work 2,894 2,271 1,985Trade creditors 1,498 1,084 849Other taxes and social security 3,694 1,181 994Other creditors 734 387 453Accruals and deferred income 2,266 2,164 3,144

Total trade and other payables 11,086 7,087 7,425

Trade payables are non-interest bearing and are normally settled on 30 day terms and other payables are non-interest bearing and have an average term of two months.

20. Provisions

Dilapidations£’000

Contingent Consideration

£’000Total

Provisions

At 1 January 2012 140 – 140Arising during the year 10 – 10As at 31 December 2012 150 - 150Arising during the year 10 360 370

As at 31 December 2013 160 360 520

31 Dec2013

£’000

31 Dec2012

£’000

1 Jan 2012

£’000

Non-current provisions 520 150 140

DilapidationsThis provision relates to potential dilapidation costs on property leases. The provision is management’s best estimate of potential future costs expected to be incurred on exit of the leases, which is not anticipated until 2029 at the earliest.

Contingent ConsiderationA provision was established for the potential additional costs relating to an earn out on the Tynemarch acquisition – see notes 22 and 27.

21. Commitments and contingenciesOperating lease commitmentsThe Company has entered into an operating lease in respect of the head office premises of £240,000 per annum (Dec-12 – £240,000). In 2009 the company entered a Deed of Variation with the landlord, whereby in exchange for an extension of the existing premises an extension of the lease was entered into. The extended lease will expire in 2029 and a rent review was made in October 2010 and every 5 years thereafter. There are no restrictions placed upon the Company by entering into these leases. The lease expenditure charged to the income statement during the 12 months ended 31 December 2013 is £578,000 (Dec-12: £522,000). Future minimum rentals payable under non-cancellable operating leases as at 31 December 2013 and 2012 analysed by the period in which they fall due are as follows:

2013£’000

2012£’000

Less than 1 year 689 450Between 1 and 5 years 1,804 1,241More than 5 years 1,441 1,682

3,934 3,373

Capital commitments2013

£’0002012

£’000

Contracted but not provided 68 106

The Company has given counter indemnities amounting to £263,000 (31 December 2012: £314,000) in respect of performance bonds issued by banks on behalf of Group companies, in the normal course of business.



eportG


ents

22. Financial instruments and financial risk management objectives and policiesFair valuesThe Group’s financial instruments comprise cash and cash equivalents (note 18), trade receivables (note 16) trade payables (note 19) and interest-bearing loans and borrowings. The carrying value of these assets and liabilities does not differ materially from their fair value.

Financial risk management objectives and policiesThe Group is exposed to market risk, liquidity risk and credit risk. The Group’s senior management oversees the management of these risks. This note presents information about the Group’s exposure to each of the above risks, the Group’s management of capital, and the Group’s objectives, policies and procedures for measuring and managing risk. The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.

Capital risk managementThe prime objective of the group’s capital management is to ensure that it maintains the financial flexibility needed to allow for value-creating investments as well as healthy balance sheet ratios.

The Group is profitable and has high cash conversion. As a result capital risk is not significant for the Group and measurement of capital management is not a tool used in the internal management reporting procedures of the Group.

The Group currently has no external debt. Should additional cash be required to fund specific projects or acquisitions the Group would fund short-term requirements by external borrowings.

Market riskMarket risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Key market risks affecting the Group include interest rate risk and currency risk. Financial instruments affected by market risk include loans and borrowings and deposits.

Interest rate riskThe Group has only limited exposure to interest rate risk as it has no external borrowings.

Foreign currency riskForeign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group’s exposure to the risk of changes in foreign exchange rates relates primarily to the Group’s operating activities (when revenue or expense is denominated in a different currency from the Group’s functional currency) and the Group’s net investments in foreign subsidiaries.

Exposure to foreign currency risk is monitored by the Finance Department under policies approved by the board. An assessment of the risks is provided to the board at regular intervals and is discussed to ensure the risk mitigation procedures are compliant with Group policy and that any new risks are appropriately managed.

The exposure to a short-term fluctuation in exchange rates on the investment in foreign subsidiaries is not expected to have a material impact on the results of the Group.

Credit riskCredit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. The Group is exposed to credit risk from its operating activities (primarily for trade receivables) and from its financing activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.

The Group’s principal financial assets are cash and cash equivalents and trade and other receivables, which represent the Group’s maximum exposure to credit risk in relation to financial assets. The Group’s credit risk is primarily attributable to its trade and other receivables. The requirement for an impairment is analysed at each reporting date on an individual basis for major customers. Additionally, minor receivables are grouped together into homogenous groups and assessed for impairment collectively. The calculation is based on actual historical data.

The Group has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. The carrying amount of financial assets recorded in the financial statements, which is net of impairment losses, represents the Group’s maximum exposure to credit risk.

At 31 December 2013 there was one customer that owed the Group £12,730,000 (Dec-12: £10,754,000, Dec-11: £10,344,000) which accounted for approximately 45% (Dec-12: 53%, Dec-11: 58%) of net trade receivables.


22. Financial instruments and financial risk management objectives and policies continuedLiquidity riskThe table below summarises the maturity profile of the group’s financial liabilities at 31 December 2013, 2012 and 2011 based on contractual undiscounted payments.

On demand£’000

Less than 1 year£’000

Total£’000

1 January 2012Trade and other payables 2,830 4,595 7,425

31 December 2012Trade and other payables 1,491 5,596 7,087

31 December 2013Trade and other payables 2,002 9,084 11,086

Management review the liquidity position of the group on a regular basis from KPI and other management information. All liabilities are due within 1 year and it is therefore considered unlikely that any would be settled significantly earlier than indicated.

Fair values of financial assets and financial liabilitiesSet out below is a comparison by category of carrying amounts and fair values of all the Groups financial instruments that are carried in the financial statements.

Carrying amount Fair value

2013£’000

2012£’000

2011£’000

2013£’000

2012£’000

2011£’000

AssetsCash and cash equivalents 7,538 8,549 3,570 7,538 8,549 3,570Trade and other receivables 27,827 19,990 5,946 27,827 19,990 5,946LiabilitiesCurrentTrade and other payables (7,392) (5,906) (6,431) (7,392) (5,906) (6,431)Non-currentDilapidation provision (160) (150) (140) (160) (150) (140)Contingent consideration (360) – – (360) – –

All financial instruments are classified as level 1 financial instruments, with the exception of contingent consideration which is a level 3 financial instrument. There are no material differences between fair value and the book value of any of the financial instruments.

The fair value of contingent consideration has been estimated based on management’s profit projections.

Contingent consideration

£’000

Fair value of contingent consideration at 1 January 2013 –Acquisitions 360Changes in fair value taken to the profit and loss account –Contingent consideration paid –

Fair value of contingent consideration at 31 December 2013 360

The consideration has been assumed at the maximum amount of £450,000 (Note 27) and discounted at the company WACC rate.

SensitivityShould profit projections for the 3 year earn out period fall by 15% the fair value of contingent consideration would reduce to nil. Should profit projections fall by 5% then the fair value of contingent consideration would reduce by 33%.

Should profit projections increase then the fair value of contingent consideration will increase only by the timing of payments which would be a maximum of 9%.



eportG


ents

23. Issued capital and reservesAuthorised shares

31 Dec 2013Thousands


1 Jan 2012Thousands

Ordinary Shares of £1 each Nil 4,578 4,578Ordinary Shares of 18 pence each 68,332 Nil Nil

Ordinary Shares issued and fully paid31 Dec 2013Thousands

31 Dec 2013£’000


31 Dec 2012£’000

1 Jan 2012Thousand

1 Jan 2012£’000

Share capitalShares at the beginning of the period 4,578 4,578 4,578 4,578 4,578 4,578Shares issued 7,693 7,693 – – – –

12,271 12,271 4,578 4,578 4,578 4,578

Converted from £1 to 18p shares 68,175 12,271 – – – –Shares issued 157 29 – – – –

Shares at the end of the period 68,332 12,300 – – – –

On 18 October 2013, the Group issued 7,093,000 £1 shares at par to CSE Global Limited for the purchase of the Semaphore Group of Companies.

On 18 October 2013, the Group issued 600,000 £1 shares at par to CSE Global Limited for the purchase of the Intellectual Property Rights relating to the Semaphore Group Kingfisher products.

On 2 December 2013, the 12,271,500 £1 shares were converted into 68,175,000 18 pence shares.

On 2 December 2013 156,911 18 pence shares were issued to employees of the Servelec Group at the strike price of £1.79.

31 Dec 2013£’000

31 Dec 2012£’000

1 Jan 2012£’000

Share premiumShares at the beginning of the period 501 501 501Shares issued 253

754 501 501

24. Share-based paymentsGroup executive share option planIn November 2013 share options were granted to employees, as determined by the Remuneration Committee and were conditional upon admission to the London Stock Exchange. The exercise price of the options is equal to the market price of the shares on the date of grant. The options only vest in accordance with the performance conditions for each executive as determined by the Remuneration Committee. Conditions are based on order entry and profit targets for the year to 31 December 2014, provided the employee remains in the group’s employment for 3 years. The options cannot be exercised within 3 years and have a maximum life of 10 years. The option will be settled by the issue of new shares and there are no cash settlement alternatives.

Date Granted Number Granted Exercise Price Vesting Period Years Expiry Period Years

Options granted during the year 2 December 2013 519,563 £1.79 3 10

On 9 January 2014 an additional 47,232 options we granted to employees at an exercise price of £2.22.

The options exercise price is set at £1.79. The option will be settled by the issue of new shares and there are no cash settlement alternatives.

Save-as-you-earn (SAYE) schemeIn November 2013 Servelec Group plc introduced a SAYE scheme which was conditional upon admission to the London Stock Exchange. Under the scheme employees may elect to save between £5 and £250 per month.

Total options granted in the year were 375,358 shares.

Long-term incentive planIn November 2013 share options were granted to senior executives, as determined by the Remuneration Committee and were conditional upon admission to the London Stock Exchange. The exercise price of the options is nil. The options only vest in accordance with the performance conditions for each executive as determined by the Remuneration Committee for the year ending 31 December 2014 provided the employee remains in the group’s employment for 3 years. The options cannot be exercised within 3 years and have a maximum life of 10 years. The option will be settled by the issue of new shares and there are no cash settlement alternatives.


24. Share-based payments continuedFurther details of the vesting conditions are in the Remuneration Committee report on pages 37 to 47.

Date Granted Number Granted Exercise Price Vesting Period Years Expiry Period Years

Options granted during the year 2 December 2013 462,442 £nil 3 10

The following table summarises the number and weighted average exercise prices (WAEP) of and movements in, share options during the year.

2013No

2013WAEP(£)

2012No

2012WAEP(£)

Outstanding as at 1 January – – – –Granted during the year 1,357,363 1.18 – –

Outstanding at 31 December 1,357,363 1.18 – –

• The weighted average fair value of options granted during the year was £0.03.• There are no options exercisable at the year end.• The following table lists the inputs to the models used for the year ended 31 December 2013.

2013

Dividend yield –Volatility 0.5Expected life of option 3.5 yearsShare price at 31 December 2013 £2.36

The expected life of the options has been estimated as 6 months following exercise date. As there is little historical data the volatility has been estimated at 0.5. Estimates using volatility values of 0.3 and 0.7 do not give materially different values.

The fair value of the share options is measured at the grant date taking into account the terms and conditions upon which the instruments were granted. The cost of the options is recognised over expected vesting period. Until the liability is settled it is re-measured at each reporting date with changes in fair value recognised in profit or loss.

The expense recognised during the year to 31 December 2013 is £41,000 (Dec 12: £nil).

25. Related party disclosuresIdentity of related partiesServelec Group plc is the ultimate parent company.

The consolidated financial statements of the Group include:

Company Country of registration and number ClassShares held

(%)

Servelec Healthcare Limited (formerly CSE-Healthcare Systems Limited) England (No. 1323205) Ordinary 100Servelec Systems Limited (formerly CSE-Servelec Limited) England (No. 6879601) Ordinary 100Servelec Controls Limited (formerly CSE-Controls Limited) England (No. 4608506) Ordinary 100Servelec Controls (Motherwell) Limited (formerly CSE-Controls

(Motherwell) Limited) Scotland (No. SC050341) Ordinary 100Seprol Limited (formerly CSE-Seprol Limited) England (No. 1610543) Ordinary 100Tynemarch Holdings Limited (formerly CSE-Tynemarch Holdings Limited) England (No. 3397034) Ordinary 100Tynemarch Systems Limited (formerly CSE-Tynemarch Systems Limited) England (No. 1774901) Ordinary 100Servelec Technologies Limited England (No. 08661987) Ordinary 100CSE-Semaphore Belgium SA Belgium (No.RLE (Nivelles) 0886.847.541) Ordinary 100CSE-Semaphore Australia Pty Limited Australia (No. CAN 006805910) Ordinary 100CSE-Semaphore Inc USA Ordinary 100



eportG


ents

Servelec Healthcare Limited supplies software and IT solutions and services into the healthcare and social services markets. Servelec Systems Limited is involved in the design, manufacture, installation and commissioning of control and management information systems, the development, manufacture and sale of electronic and microprocessor monitoring equipment. Servelec Controls Limited, a systems integrator, is principally engaged in the supply of computer based information solutions and services. Servelec Controls (Motherwell) Limited became a non-trading subsidiary with effect from 1 April 2011 and Seprol Limited is dormant. Tynemarch Holdings Limited is a holding company and Tynemarch Systems Limited delivers optimisation software and consultancy, predominantly in the water industry.

Semaphore Belgium SA, Semaphore Australia Pty Limited and Semaphore Inc are companies involved in the design, manufacture and sale of electronic and micro processor monitoring equipment.

Transactions with related partiesThe following table provides the total amount of transactions, which have been entered into with related parties for the relevant financial year or period:

2013£’000

2012£’000

CSE Global Limited (previous parent company) and subsidiariesSales to related parties 441 229Royalties charged by related parties – 165Acquisition of intangible assets from related parties 1,415 –Acquisition of Semaphore Group from related parties 7,675 –IPO costs paid by related parties 7,304 –Management charge by related parties 765 825Purchase from related parties 18 16Amounts owed by related parties 77 77Interest received from related parties 15 12

MGC Accounting Solutions LtdConsultancy services 43 41

The consultancy services invoiced by MGC Accounting Solutions Ltd relate to the services of MG Cane prior to his appointment as a Director.

Terms and conditions of transactions with related partiesThe sales to and purchases from related parties are made at normal market prices. Outstanding balances at the year end are unsecured, interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For the year ended 31 December 2013, the Company has not recorded any impairment of receivables relating to amounts owed by related parties. This assessment is undertaken each financial year through examining the financial position of the related party and the market in which the related party operates.

Compensation of key management personnelKey management includes the Directors. The compensation paid or payable to key management for employee services is shown below:

Servelec Group plc

£’000

CSE Global Ltd (1) (2)

£’000

Total2013

£’000

Servelec Group Plc

£’000

CSE Global Ltd (1)

£’000

Total2012

£’000

Short-term employee benefits 859 4,383 5,242 678 677 1,355Pension contributions 84 84 160 – 160

Total compensation paid to key management personnel 943 4,383 5,326 838 677 1,515

(1) Employee benefits paid by previous holding company not recharged to Servelec Group Plc(2) Benefits paid by CSE Global Ltd for 2013 include share rewards of £4,055,000 (2012: £nil)

Directors’ emoluments are set out in the Directors’ remuneration Report on pages 37 to 47.


26. Discontinued operationsIn December 2013, the Group disposed of the full share capital of CSE-Controls s.r.o. The disposal has been categorised as a discontinued operation.

(i) The impact of the operations discontinued in 2013 and 2012 is as follows:

2013£’000

2012£’000

Revenue 2891 1,121Expenses (2,221) (840)

Gross profit 670 281Administration costs (334) (274)

Profit before tax from a discontinued operation 336 7Income tax expense (77) –

Profit for the financial period from a discontinued operation 259 7

Loss on disposal (274) –

(Loss)/profit from discontinued operations (15) 7

(ii) The value of the assets and liabilities disposed of during the sale of CSE-Controls s.r.o. at the point of sale were:

£’000

Property, plant and equipment 3Debtors 1,499Cash and short-term deposits 406Creditors (1,458)

Net assets sold 450

(iii) The loss on disposal of CSE-Controls s.r.o. is analysed below:

£’000

Sales proceeds 380Costs to sell (204)Net assets disposed (Note 26 (ii)) (450)

Loss on disposal (274)

Of the sale proceeds £380,000 is included in other receivables at the year end.

The net cash flows attributable to CSE-Controls sro are:

2013£’000

2012£’000

Profit before tax from discontinued operationsProfit before tax 336 7Loss on disposal (274) –

62 7

Working capital movement (380) –Operating cash flow (318) 7

Investing activities (204) –



eportG


ents

27. Business combinationsAcquisition of Tynemarch Holdings LimitedOn 5 February 2013, the Group acquired 100% of the voting shares of Tynemarch Holdings Limited and its subsidiary Tynemarch Systems Engineering Limited, a technology-led consultancy to the water and environmental management industries. Tynemarch’s business will provide a base for the Group to further expand its existing activities within the water and environmental management sectors.

The fair values of the identifiable assets and liabilities of Tynemarch Holdings Limited and Tynemarch Systems Engineering Limited as at the date of acquisition were:

Fair value recognised on acquisition

£’000

AssetsProperty, plant and equipment 13Cash and cash equivalents 1,595Trade and other receivables 503Order backlog 391Customer relationships 223Software 128

LiabilitiesTrade and other payables (263)Deferred tax liability (171)

Total identifiable net assets at fair value 2,419Goodwill arising on acquisition 916

3,335

The goodwill of £916,000 comprises the value of the assembled workforce and expected value of synergies. Goodwill is allocated entirely to the Automation segment. Due to the contractual terms imposed on acquisition, the customer list is not separable. None of the goodwill is expected to be deductible for income tax purposes.

All receivables are expected to be collected and fair value equals gross value.

From the date of acquisition, Tynemarch Holdings Limited has contributed £1,919,000 of revenue and £196,000 to the profit before tax from continuing operations of the Group. If the combination had taken place at the beginning of the year, Group revenue from continuing operations would have been £42,228,000 and the profit before tax from continuing operations for the Group would have been £10,975,000.

The deferred tax liability mainly comprises the accelerated depreciation for tax purposes of tangible and intangible assets.

£’000

Purchase considerationCash paid 2,975Contingent consideration liability 360

Total consideration 3,335

Analysis of cash flows on acquisition:Transaction costs of the acquisition (included in cash flows from operating activities) (39)Net cash acquired with the subsidiary (included in cash flows from investing activities) (1,380)

Net cash flow on acquisition (1,419)

The fair value of the consideration given is £3,335,000.

Transaction costs of £39,000 have been expensed and are included in administrative expenses.

As part of the purchase agreement with the previous owner of Tynemarch Holdings Limited a contingent consideration has been agreed. There will be additional cash payments to the previous owners of Tynemarch Holdings of £450,000, if the entity generates £1,455,000 of profit before tax in the 36-month period after the acquisition date. An amount at a fair value of £360,000 is included in provisions.


27. Business combinations continuedAcquisition of Semaphore GroupOn 18 October 2013, the Group acquired 100% of the voting shares of CSE-Semaphore Belgium SA, CSE-Semaphore Australia Pty Limited and its subsidiary CSE-Semaphore Inc. The Semaphore Group is an RTU (Remote Telemetry Unit) manufacturer and has a worldwide distribution network which will enable the Group to access international markets.

The fair value of the identifiable assets of the Semaphore Group at the date of acquisition are:

Fair value recognised on acquisition

£’000

AssetsProperty, plant and equipment 303Cash and cash equivalents 2,146Inventories 929Trade and other receivables 2,519Customer relationships 1,212Software 498

LiabilitiesTrade and other payables (3,409)Deferred tax liability (342)

Total identifiable net assets at fair value 3,856Goodwill arising on acquisition 3,819

7,675

The goodwill of £3,819,000 comprises the value of the assembled workforce and expected value of synergies. Goodwill is allocated entirely to the Automation segment. None of the goodwill is expected to be deductible for income tax purposes.

The fair value of the trade receivables at acquisition is £2,519,000. The gross amount on acquisition was £2,807,000 and the adjustment made of £288,000 is for receivables not expected to be received.

From the date of acquisition, the Semaphore Group has contributed £1,989,000 of revenue and £120,000 to the profit before tax from continuing operations of the Group. If the combination had taken place at the beginning of the year, Group revenue from continuing operations would have been £48,960,000 and the profit before tax from continuing operations for the Group would have been £11,124,000.

The deferred tax liability mainly comprises the accelerated depreciation for tax purposes of tangible and intangible assets.

£’000

Purchase considerationShares issued 7,093Purchase of intercompany balances 582

Total consideration 7,675

Analysis of cash flows on acquisition:Net cash acquired with the subsidiary (included in cash flows from investing activities) 1,564

Net cash flow on acquisition 1,564

The fair value of the consideration given is £7,675,000. Transaction costs were met by CSE Global Limited, the seller.



eportG


ents

28. IFRS conversionFor all periods up to and including the year ended 31 December 2012, Servelec Group plc, the Group, prepared its financial statements in accordance with United Kingdom generally accepted accounting practice (UK GAAP). These financial statements, for the year ended 31 December 2013 are the first the Group is required to prepare in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU).

Accordingly, the Group has prepared financial statements which comply with IFRSs applicable for periods beginning on or after 1 January 2012 and the significant accounting policies meeting those requirements are described in the relevant notes.

In preparing these financial statements, the Group has started from an opening balance sheet as at 1 January 2012, the Group’s date of transition to IFRSs and made those changes in accounting policies and other restatements required by IFRS 1 for the first-time adoption of IFRSs. In addition, the Group identified some adjustments as part of this process that do not arise from a GAAP difference and have therefore been classified as a policy change, rather than IFRS GAAP reclassifications or remeasurements.

IFRS 3 Business Combinations has not been applied to acquisitions of subsidiaries that occurred before 1 January 2010.

UK GAAP 1 Jan 2012

£’000

Policychange (a)

£’000

IFRSreclassifications (b)

£’000

IFRS adjustment (c)

£’000

IFRS 1 Jan 2012

£’000

ASSETSNon-current assetsProperty, plant and equipment 1,102 – – – 1,102Intangible assets 11,042 – – 1,832 12,874Deferred tax asset – – – 111 111

Total non-current assets 12,144 – – 1,943 14,087

Current assetsInventories 91 – – – 91Trade and other receivables 21,132 (285) (3,088) – 17,759Inter-company loan 1,500 – – – 1,500Cash and cash equivalents 3,569 – 1 – 3,570

Total current assets 26,292 (285) (3,087) – 22,920

TOTAL ASSETS 38,436 (285) (3,087) 1,943 37,007

EQUITY AND LIABILITIES –Share capital 4,578 – – – 4,578Share premium 501 – – – 501Currency translation reserve – – (67) – (67)Retained earnings 21,677 (285) 68 1,533 22,993

Total equity shareholders’ funds 26,756 (285) 1 1,533 28,005

Non-current liabilitiesProvisions – – 140 – 140Deferred tax liabilities – – – 410 410

Total non-current liabilities – – 140 410 550

Trade and other payables 10,653 – (3,228) – 7,425Current corporation tax 1,027 – – – 1,027

Total current liabilities 11,680 – (3,228) – 8,452

TOTAL LIABILITIES 11,680 – (3,088) 410 9,002

TOTAL EQUITIES AND LIABILITIES 38,436 (285) (3,087) 1,943 37,007


28. IFRS conversion continuedUK GAAP

31 Dec 2012£’000

Policychange (a)

£’000

IFRSreclassifications (b)

£’000

IFRSadjustment (c)

£’000

IFRS31 Dec 2012

£’000

ASSETSNon-current assetsProperty, plant and equipment 1,262 – (74) – 1,188Intangible assets 10,085 – 74 2,670 12,829Deferred tax asset – – – 221 221

Total non-current assets 11,347 – – 2,891 14,238

Current assetsInventories 86 – – – 86Trade and other receivables 20,857 (617) – – 20,240Cash and cash equivalents 8,548 – – 1 8,549

Total current assets 29,491 (617) – 1 28,875

TOTAL ASSETS 40,838 (617) – 2,892 43,113

EQUITY AND LIABILITIESShare capital 4,578 – – – 4,578Share premium 501 – – – 501Currency translation reserve – – (88) – (88)Retained earnings 27,427 (617) 88 2,551 29,449

Total equity shareholders funds 32,506 (617) – 2,551 34,440

Non-current liabilitiesProvisions – – 150 – 150Deferred tax liabilities – – – 341 341

Total non-current liabilities – – 150 341 491

Current liabilitiesTrade and other payables 7,237 – (150) – 7,087Current corporation tax 1,095 – – – 1,095

Total current liabilities 8,332 – (150) – 8,182

TOTAL LIABILITIES 8,332 – – 341 8,673

TOTAL EQUITIES AND LIABILITIES 40,838 (617) – 2,892 43,113

UK GAAP2012

£’000

PolicyChange (a)

£’000Discontinued Operation (b)

IFRS Adjustment

(c)£’000

IFRS2012

£’000

Revenue 40,814 (332) (1,121) – 39,361Cost of sales (2.3,240) 840 – (22,400)

Gross profit 17,574 (332) (281) – 16,961Selling and distribution expenses (1,231) 39 – (1,192)Administration and other expenses (6,005) 235 838 (4,932)

Operating profit from continuing operations 10,338 (332) (7) 838 10,837Finance costs – – – – –Finance income 48 – – – 48

Profit before tax from continuing operations 10,386 (332) (7) 838 10,885Income Tax Expense (2,615) – 179 (2,436)

Profit/(Loss) for the year from continuing operations 7,771 (332) (7) 1,017 8,449

Profit after tax for the year from discontinued operations 7 – 7

Profit/(loss) for the year 7,771 (332) – 1,017 8,456



eportG


ents

(a) Revenue policy changeUnder the previous Group, licence revenue was recognised at the point of delivery. The Directors have taken the opportunity to review this policy and retrospectively adjust licence income relating to contracts outside of the National Programme such that it is recognised over the term of the contract.

(b) IFRS Reclassifications Software and licences purchased have been reclassified from fixed assets to intangible assets (31 December 2012: £74,000, 1 January 2012: £nil).

Previously the amounts due on the NPfIT contract have been disclosed separately, but on reviewing the contract terms management believe it reflects the underlying commercial terms to net off all outstanding amounts and disclose as 1 figure in trade and other receivables (31 December 2012: £nil, 1 January 2012: £3,088,000).

A currency translation reserve has been separated out from retained earnings (31 December 2012: £88,000, 1 January 2012: £67,000).

The dilapidation provision was originally classified in accruals but has now been reclassified to provisions (31 December 2012: £150,000, 1 January 2012: £140,000).

(c) Business combinationsThe method of accounting for business combinations under IFRS is significantly different to that applied under UK GAAP. The main differences applicable to Group relate to the cessation of goodwill amortisation and the recognition and amortisation of intangible assets with acquired businesses which are explained below.

(i) Goodwill amortisationIFRS 3 ‘Business Combinations’ prohibits merger accounting and the amortisation of goodwill. The standard requires goodwill to be carried at cost with annual impairment reviews.

The Group has elected to take advantage of the exemption under IFRS 1 not to restate all business combinations prior to 1 January 2010. The impact of IFRS 3 and IFRS 1 on the Group’s accounting for goodwill in 2012 is as follows:• the value of goodwill reported under UK GAAP at 1 January 2010 is frozen; and• the goodwill amortisation charge in 2012 of £981,000 (2011: £1,140,000, 2010: £1,012,000) under UK GAAP has been reversed.

(ii) Recognition and amortisation of intangible assets within acquired businessUnder IFRS 3, the identification of assets and liabilities acquired businesses includes intangible assets not previously recognised under UK GAAP. In the Group’s case, the principal intangible assets recognised separately from goodwill on an acquisition are order backlog and customer relationships. The intangible assets are valued for each acquisition after 1 January 2010 and amortised over their estimated economic lives.

The principal acquisition impacting 2012 was SIA Limited which was bought in March 2010. The value of the intangible assets for this business was carried out by external independent valuers and amounted to £1,694,000.

The adjustments made are summarised below:£’000

Amortisation added back 2,815Remeasurement 546Amortisation charge (691)

Total 2,670

The impact in the year ending 31 December 2012 is:£’000

Amortisation added back 981Intangible amortisation (143)

Total 838

The impact in the year ending 1 January 2012 is:£’000

Amortisation added back 1,140Intangible amortisation (143)

Total 997

Deferred taxDeferred tax has been calculated on the IFRS adjustments.


Discontinued operationIn December 2013, the Group disposed of CSE-Controls sro and in accordance with IFRS has restated the profit and loss account for the year ending 31 December 2012, including the results of CSE-Controls sro within profit after tax for the year from discontinued operations.

29. PensionsThe Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in independently administered funds. The total pension cost payable by the Group amounted to £499,000 (2012: £611,000).



eportG


ents

We have audited the Parent Company financial statements of Servelec Group plc for the year ended 31 December 2013 which comprise the Company balance sheet, the Company statement of total recognised gains and losses and the related notes (i) to (xiii). The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditorAs explained more fully in the Directors’ Responsibilities Statement set out on page 51, the Directors are responsible for the preparation of the Parent Company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the Parent Company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statementsAn audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Parent Company’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on the financial statementsIn our opinion the Parent Company financial statements:• give a true and fair view of the state of the Company’s affairs as at 31 December 2013;• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and• have been prepared in accordance with the requirements of the Companies Act 2006.

Opinion on other matters prescribed by the Companies Act 2006In our opinion:• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006; and• the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is

consistent with the Parent Company financial statements.

Matters on which we are required to report by exceptionWe have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from

branches not visited by us; or• the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the

accounting records and returns; or• certain disclosures of directors’ remuneration specified by law are not made; or• we have not received all the information and explanations we require for our audit.

Other mattersWe have reported separately on the group financial statements of Servelec Group plc for the year ended 31 December 2013.

Stuart Watson (Senior statutory auditor)for and on behalf of Ernst & Young LLP, Statutory AuditorLeeds12 March 2014

INDEPENDENT AUDITORS’ REPORT


Notes2013

£’0002012

£’000

Fixed assets (i) 334 319Tangible fixed assets (ii) 1,417 60Deferred tax asset (iii) 35,994 24,566

Investments 36,745 24,945

Current assetsDebtors (iv) 686 1,826Cash and cash equivalents 4,644 2,251

5,330 4,077

Creditors: amounts falling due within one year (v) (8,738) (3,002)

Net current (liabilities)/assets (3,408) 1,075

Total assets less current liabilities 33,337 26,020

Creditors: amounts falling due greater than one yearProvisions (vi) (520) (150)

Net assets 32,817 25,870

Capital and reservesCalled up share capital (vii) 12,300 4,578Share premium (viii) 754 501Share based payment reserve 41 -Profit and loss account 19,722 20,791

Shareholders’ funds 32,817 25,870

Approved by the Board on 12 March 2014 and signed on its behalf by:

AR Stubbs MG Cane Chief Executive Officer Chief Financial Officer

COMPANY BALANCE SHEETFOR THE YEAR ENDED 31 DECEMBER 2013


eportG


ents

2013£’000

2012£’000

Profit for the financial year attributable to members of the Parent Company 5,431 5,523

Total recognised gains and losses relating to the year 5,431 5,523

COMPANY STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSESFOR THE YEAR ENDED 31 DECEMBER 2013


Accounting policiesA summary of the principal Company accounting policies is set out below. These have been applied on a consistent basis unless otherwise indicated.

As permitted by section 408 of the Companies Act 2006, the Company has not presented its own profit and loss account.

The Company has taken advantage of the exemptions in FRS 1 from preparing cash flows as the Group’s Consolidated Financial Statements, in which the Company is included, provide equivalent disclosures.

The Company has taken advantage of the exemption in FRS 8 not to disclose related party transactions with Group companies.

Going concernThe financial statements have been prepared on a going concern basis. Although the Company is in net liabilities, this is due to the bank overdraft which is cross guaranteed by other group companies (note 21 in the Group consolidated accounts) and therefore the Directors believe it is appropriate basis for preparation of the financial statements (see note 2 in the Group consolidated accounts).

Basis of accountingThe accounts have been prepared in compliance with the Companies Act 2006 and in accordance with UK Generally Accepted Accounting Principles. They have been prepared under the historical cost convention.

Statement of director’s responsibilities for the Company financial statementsThe Directors are responsible for preparing the Directors’ report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the Company financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the Company for that period. In preparing those financial statements, the Directors are required to:• select suitable accounting policies and then apply them consistently; • make judgements and estimates that are reasonable and prudent;• state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the

financial statements; and• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Intangible fixed assetsSoftware licences are amortised in equal amounts over a period of 5 - 6 years, which is estimated to be their useful life.

Tangible fixed assetsDepreciation is provided on all tangible fixed assets, at rates calculated to write off the cost, less estimated residual value based on prices prevailing at the date of acquisition of each asset evenly over its expected useful life, as follows:Plant and machiner – 20-25% per annumFixtures and fittings – 10% per annum

The carrying values of tangible fixed assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.

InvestmentsInvestments held as fixed assets are stated at cost less provision for any permanent diminution in value.

Deferred taxationDeferred taxation is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date where transactions or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more tax, with the following exceptions:• Provision is made for tax on gains arising from the revaluation (and similar fair value adjustments) of fixed assets, or gains on disposal of fixed

assets that have been rolled over into replacement assets, only to the extent that, at the balance sheet date, there is a binding agreement to dispose of the assets concerned. However, no provision is made where, on the basis of all available evidence at the balance sheet date, it is more likely than not that the taxable gain will be rolled over into replacement assets and charged to tax only where the replacement assets are sold.

• Deferred tax assets are recognised only to the extent that the Directors consider that it is more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which timing differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

NOTES TO THE FINANCIAL STATEMENTS


eportG


ents

Foreign currenciesTransactions in foreign currencies are recorded at the rate ruling at the date of the transaction or at the contracted rate if the transaction is covered by a forward foreign currency contract. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date or if appropriate at the forward contract rate. All differences are taken to the profit and loss account.

Pension costsThe group operates a defined contribution pension scheme. Assets of the scheme are held separately from those of the Company in independently administered funds. The amount charged against profits represents the contribution payable to the schemes in respect of the financial period.

Share-based paymentsThe Group operates equity settled, share-based compensation plans. The fair value of the employee services received in exchange for the grant of the options is calculated using a Black-Scholes pricing model and is recognised as an expense over the vesting period. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options or performance shares granted. At each balance sheet date, the Group revises its estimates of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates, if any, in the income statement, and a corresponding adjustment to equity over the remaining vesting period. No expense is recognised for awards that do not ultimately vest except for awards where vesting is conditional upon market or non-vesting conditions which are treated as vesting irrespective of whether or not the market or non-vesting condition is satisfied provided that all other performance or service conditions are satisfied.

(i) Tangible fixed assets

Company

Plant and machinery, fixtures and fittings

£’000

Cost:At 1 January 2013 983Additions 118

At 31 December 2013 1,101

Accumulated depreciation:At 1 January 2013 664Charge for the year 103


Net book value:At 31 December 2013 334

At 1 January 2013 319

(ii) Intangible fixed assets

CompanyLicences

£’000

Cost:At 1 January 2013 84Additions 1,415Disposals (3)

At 31 December 2013 1,496

Accumulated depreciation:At 1 January 2013 24Charge for the year 58Disposals (3)


Net book value:At 31 December 2013 1,417

At 1 January 2013 60



(iii) Investments in subsidiary companies

Company

Ordinary Share in subsidiary undertakings

£’000

Cost:At 1 January 2013 24,566Investments in subsidiaries 12,429Transfers to subsidiaries (2,001)

At 31 December 2013 34,994

Shares in the subsidiaries

Company Country of registration and number Class and percentage of shares held

Servelec Healthcare Limited (formerly CSE-Healthcare Systems Limited) England (No. 1323205) Ordinary 100%Servelec Systems Limited (formerly CSE-Servelec Limited) England (No. 6879601) Ordinary 100%Servelec Controls Limited (formerly CSE-Controls Limited) England (No. 4608506) Ordinary 100%Servelec Controls (Motherwell) Limited (formerly CSE-Controls

(Motherwell) Limited) Scotland (No.SC050341) Ordinary 100%Seprol Limited (formerly CSE-Seprol Limited) England (No. 1610543) Ordinary 100%Servelec Technologies Limited England (No. England (No. 08661987) Ordinary 100%CSE Semaphore Belgium S A Belgium (No. RLE (Nivelles) 0886.847.541) Ordinary 51%Tynemarch Holdings Limited England (No. 3397034) Ordinary 100%

In the opinion of the Directors the investment in the Company’s subsidiary undertakings is worth at least the amount at which it is stated in the balance sheet.

On 5 February 2013, the Company acquired 100% of the share capital of Tynemarch Holdings Limited and its subsidiary company Tynemarch Systems Limited. See note 27.

On 18 October 2013, the Company acquired 100% of the share capital of Servelec Technologies, CSE-Semaphore Belgium, CSE-Semaphore Australia and CSE-Semaphore Inc from the then Parent Company CSE Global Limited.

On 18 October 2013, the Company restructured its subsidiaries by transferring 100% of the share capital of CSE-Servelec Limited and CSE-Tynemarch Holdings to Servelec Technologies Limited (£2,001,000).

A full list of the Groups subsidiaries are detailed in note 25. The investments made by the Company in 2013 are summarised below.

£’000

Tynemarch Holdings Limited (note 27) 3,335Servelec Technologies Limited (new shares) 2,00151% Semaphore Belgium (note 27) 3,549Servelec Technologies Limited (49% Semaphore Belgium and 100% Semaphore Australia) (note 27) 3,544

12,429

Transfer of investment in CSE-Servelec Limited and CSE-Tynemarch Holdings to Servelec Technologies Limited (2,001)

(iv) Debtors

2013£’000

2012£’000

Trade debtors 2 5Amounts owed by subsidiary undertakings 460 1,738Prepayments and accrued income 120 62Other debtors 104 21

686 1,826


eportG


ents

(v) Creditors:Amounts falling due within one year

2013£’000

2012£’000

Bank Overdraft 7,001Amounts owed to subsidiary undertakings – 1,677Payments received on account 202 151Trade creditors 136 687Current corporation tax 1,007 38Other creditors – 27Accruals and deferred income 392 572

8,738 3,152

(vi) Provisions:

Dilapidations£’000

Contingent Consideration

£’000

TotalProvisions

£’000

At 1 January 2012 140 – 140Arising during the year 10 – 10

As at 31 December 2012 150 – 150Arising during the year 10 360 370

As at 31 December 2013 160 360 520

Analysed as31 Dec 2013

£’00031 Dec 2012

£’0001 Jan 2012

£’000

Non-current provisions 520 150 140

DilapidationsThis provision relates to potential dilapidation costs on property leases.

Contingent ConsiderationA provision was established for the potential additional costs relating to an earn out on the Tynemarch acquisition – see note 22.

(vii) Issued share capitalAuthorised shares



Ordinary Shares of £1 each Nil 4,578Ordinary Shares of 18 pence each 68,332 Nil

Ordinary shares issued and fully paid

2013Thousands

2013£’000

2012Thousands

2012£’000

Share capitalShares at the beginning of the period 4,578 4,578 4,578 4,578Shares issued 7,693 7,693 – –

12,271 12,271 4,578 4,578

Converted from £1 to 18p shares 68,175 12,271Shares issued 157 29

Shares at the end of the period 68,332 12,300

On 18 October 2013, the Company issued 7,093,000 £1 shares at par to CSE Global Limited for the purchase of the Semaphore Group of Companies.

On 18 October 2013, the Company issued 600,000 £1 shares at par to CSE Global Limited for the purchase of the Intellectual Property Rights relating to the Semaphore Group Kingfisher products.

On 2 December 2013, the 12,271,500 £1 shares were converted into 68,175,000 18 pence shares.

On 2 December 2013 156,911 18 pence shares were issued to employees of the Servelec Group at the strike price of £1.79.



(viii) Movements on reservesShare-based

payment reserve

£’000

Share Premium

£’000

Profit and loss account

£’000

At 1 January 2012 – 501 17,268Profit for the financial year – – 5,523Dividend paid to former parent – – (2,000)

At 31 December 2012 – 501 20,791Profit for the year – – 5,431Dividend paid to former parent – – (6,500)Share-based payments 41 – –Shares issued _ 253 –

At 31 December 2013 41 754 19,722

As permitted by Section 408 of the Companies Act 2006, no Profit and Loss Account is presented. The Company’s profit for the financial year was £5,431,000 (2012: £5,523,000).

(ix) Share based paymentsGroup executive share option planIn November 2013 share options were granted to employees, as determined by the Remuneration Committee and were conditional upon admission to the London Stock Exchange. The exercise price of the options is equal to the market price of the shares on the date of grant. The options only vest in accordance with the performance conditions for each executive as determined by the Remuneration Committee. Conditions are based on order entry and profit targets for the year to 31 December 2014, provided the employee remains in the group’s employment for 3 years. The options cannot be exercised within 3 years and have a maximum life of 10 years. The option will be settled by the issue of new shares and there are no cash settlement alternatives.

Date GrantedNumber Granted

Exercise Price

Vesting Period Years

Expiry Period Years

Options granted during the year 2 December 2013 519,563 £1.79 3 10

On 9 January 2014 an additional 47,232 options were granted to employees at an exercise price of £2.22.

The options exercise price is set at £1.79. The option will be settled by the issue of new shares and there are no cash settlement alternatives.

Save-as-you-earn (SAYE) schemeIn November 2013 Servelec Group Plc introduced a SAYE scheme and was conditional upon admission to the London Stock Exchange. Under the scheme employees may elect to save between £5 and £250 per month.

Long-term incentive planIn November 2013 share options were granted to senior executives, as determined by the Remuneration Committee and were conditional upon admission to the London Stock Exchange. The exercise price of the options is nil. The options only vest in accordance with the performance conditions for each executive as determined by the Remuneration Committee for the year ending 31 December 2014 provided the employee remains in the group’s employment for 3 years. The options cannot be exercised within 3 years and have a maximum life of 10 years. The option will be settled by the issue of new shares and there are no cash settlement alternatives.

Further details of the vesting conditions are in the Remuneration Committee report on pages 37 to 47.

Date GrantedNumber Granted

Exercise Price

Vesting Period Years

Expiry Period Years

Options granted during the year 2 December 2013 462,442 £nil 3 10

The following table summarises the number and weighted average exercise prices (WAEP) of and movements in, share options during the year.

2013No

31 Dec 2013WAEP(£)

31 Dec 2012No

31 Dec 2012WAEP(£)

Outstanding as at 1 January – – – –Granted during the year 1,357,363 1.18 – –

Outstanding at 31 December 1,357,363 1.18 – –

The weighted average fair value of options granted during the year was £0.03.

There are no options exercisable at the year end.


eportG


ents

(ix) Share based payments continuedLong-term incentive plan continuedThe following table lists the inputs to the models used for the year ended 31 December 2013.

2013

Dividend yield –Volatility 0.5Expected life of option 3.5 yearsShare price at 31 December 2013 £2.36

The expected life of the options has been estimated as 6 months following exercise date. As there is little historical data the volatility has been estimated at 0.5. Estimates using volatility values of 0.3 and 0.7 do not give materially different values.

The fair value of the share options is measured at the grant date taking into account the terms and conditions upon which the instruments were granted. The cost of the options is recognised over expected vesting period. Until the liability is settled it is re-measured at each reporting date with changes in fair value recognised in profit or loss.

The expense recognised during the year to 31 December 2013 is £41,000 (Dec 12: £nil).

(x) Contingent liabilitiesThe Company has given cross guarantees for all sums owed by Servelec Systems Limited, Servelec Healthcare Limited, Servelec Controls Limited, Seprol Limited and Servelec Controls (Motherwell) Limited. This has been secured by a debenture over all of Servelec Group plc assets.

At 31 December 2013 the amount outstanding was £nil (2012: £nil).

(xi) PensionsThe Company operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the group in independently administered funds. The total pension cost payable by the Company amounted to £68,000 (2012: £90,000).

(xii) Related party transactionsThe Company has taken advantage of the exemption of FRS 8 not to disclose related party transactions with Group companies.

(xiii) Financial commitmentsThe Company has annual commitments under an operating lease in respect of the head office premises of £240,000 (2012: £240,000). The lease expires in 2029 and a rent review as made in October 2010 and every five years thereafter.

Capital commitments2013

£’0002013

£’000

Contracted but not provided 68 106


CORPORATE DIRECTORY

Shares in the subsidiaries Servelec Group plc (Head Office)Rotherside RoadEckingtonSheffieldS21 4HL

Telephone: +44 (0) 1246 437400Email: [email protected]: www.servelec-group.com

Servelec Healthcare LimitedRotherside RoadEckingtonSheffieldS21 4HL

Telephone: +44 (0) 1246 437500Email: [email protected]: www.servelec-healthcare.com

Servelec Technologies LimitedRotherside RoadEckingtonSheffieldS21 4HL

Telephone: +44 (0) 1246 437580Email: [email protected]: www.servelec-technologies.com

Servelec Systems LimitedRotherside RoadEckingtonSheffieldS21 4HL

Telephone: +44 (0) 1246 437580Email: [email protected]: www.servelec-systems.com

Servelec Controls LimitedRotherside RoadEckingtonSheffieldS21 4HLUnited Kingdom

Telephone: +44 (0) 1246 437060Email: [email protected]: www.servelec-controls.com

Servelec Controls Limited - AberdeenThe Technology CentreClaymore DriveAberdeen AB23 8GD

Telephone: +44 (0) 1224 707 700Fax: +44 (0) 1224 707 017Email: [email protected]: www.servelec-controls.com

Servelec Controls Limited – GlasgsowColtness HouseLark WayStrathclyde Business ParkBelshillLanarkshireML4 3RB

Telephone: +44 (0) 1698 266 199Fax: +44 (0) 1698 253 672Email: [email protected]: www.servelec-controls.com

Servelec Controls LimitedSystems HouseWest Carr RoadBrooklands ParkDinningtonSheffieldS25 2JZ

Telephone: +44 (0) 1909 550930Email: [email protected]: www.servelec-controls.com

Servelec Controls LimitedSuite BChadwick HouseBirchwoodWarringtonWA3 6AE

Telephone: + 44 (0) 1925 846200Email: [email protected]: www.servelec-controls.com

Tynemarch Systems LimitedSpring CourtStation RoadDorking, SurreyRH4 1EBUnited Kingdom

Telephone: + 44 (0) 1306 742772Fax: + 44 (0) 1306 742276Email [email protected]: www.tynemarch.co.uk

Semaphore Americas Inc280 Wekiva Springs RoadSuite 3030Longwood, FL 32779USA

Telephone: +1 (844) 475 8020Email: [email protected]: www.servelec-semaphore.com

Semaphore Pty LimitedUnit 8 / 3-5 Gilda CrtMulgrave, Victoria 3170Australia

Telephone: +61 (03) 8544 8544Fax: +61 (03) 8544 8555Email: [email protected]: www.servelec-semaphore.com

Semaphore S.A.Europe, Middle East, AfricaWaterloo Office Park - Building “M”Drève Richelle, 161B-1410 WaterlooBelgium

Telephone: +322.387.42.59Fax: +322.387.42.75Email: [email protected]: www.servelec-semaphore.com


eportG


ents

DIRECTORS, SECRETARY, REGISTERED AND HEAD OFFICE AND ADVISERS

Directors Richard Last, Non-Executive ChairmanAlan Russell Stubbs, Chief Executive OfficerMike Geoffrey Cane, Finance DirectorRoger Steven McDowell, Senior Independent Non-Executive DirectorBernie Joseph Waldron, Independent Non-Executive Director

Company Secretary Mike Cane

Registered Office and Head Office of the Company

Rotherside RoadEckingtonSheffieldSouth YorkshireS21 4HL

Sponsor, financial adviser, sole bookrunner and broker

Investec Bank plc2 Gresham StreetLondonEC2V 7QP

English legal advisers to the LLP Company

Walker Morris Kings Court12 King StreetLeedsWest YorkshireLS1 2HL

Reporting Accountant and Auditors Ernst & Young LLP1 Bridgewater PlaceWater LaneLeedsWest YorkshireLS11 5QR

Registrars Capita Registrars LimitedThe Registry34 Beckenham RoadBeckenhamKentBR3 4TU

Financial public relations advisers to the Company

Tulchan Communications LLP85 Fleet StreetLondonEC4Y 1AE


NOTES

Servelec Group annual report and accounts 2013

Servelec Group plcRotherside RoadEckingtonSheffieldS21 4HLUnited Kingdom

Tel: +44 (0) 1246 437 400www.servelec-group.com

Servelec Group plc annual report and accounts 2013

servelec group plc annual report and accounts 2013 · servelec group plc annual report and accounts...

Documents